MNI BRIEF: Fed Says All Largest 31 US Banks Pass Stress Tests
The nation's 31 largest banks passed the Federal Reserve's stress tests this year, the Fed said Wednesday, a sign that the nation's banking system remains resilient despite last year's banking crisis.
The 2024 stress test shows that the 31 large banks subject to the test have sufficient capital to absorb nearly USD685 billion in losses and continue lending to households and businesses under stressful conditions, the Fed said in its report. The aggregate CET1 capital ratio would be projected to decline by 2.8 percentage points, from 12.7% to 9.9%, a greater decline than last year’s test but within the range of recent stress tests, the Fed said. This year's decline is due to increases in bank's credit card balances, higher delinquency rates, riskier corporate credit portfolios, and less projected pre-provision net revenue to offset losses. (See: MNI INTERVIEW2: Uninsured Bank Deposits Still Vulnerable-Bair)
The Fed also conducted its first exploratory analysis that looks at additional hypothetical risks to the broader banking system, including two funding stresses to all banks tested and two trading book stresses. "The results demonstrated that the largest and most complex banks have material exposure to hedge funds but that those banks can withstand different types of trading book shocks," Fed Vice Chair for Supervision Michael Barr said in a statement.