Stress tests

Large and regional banks again proved their resiliency in the Fed's annual exams. But analysts noted that a few lenders faced some negative surprises — a development that may scuttle investor hopes for share buybacks by those banks.

The Federal Reserve attributes the uptick in simulated losses in this year's stress test examination to heightened risks on bank balance sheets and higher expense levels. Credit cards and corporate lending were top areas of concern for the central bank.

A recent white paper from former Federal Reserve Gov. Daniel Tarullo suggests that the stress testing regime should be decoupled from bank capital requirements. But if stress testing isn't an effective means of assigning minimum regulatory capital levels, what is?

The Federal Reserve Board's 2024 stress test scenario posits severe market volatility, widening corporate bond spreads and significant declines in asset prices. The scenario comes alongside new exploratory analyses probing additional risks for the first time.

The Federal Reserve vice chair for supervision says the failure of Silicon Valley Bank showed the shortcomings of the current stress testing regime.

On a combined basis, the GSEs performed better under this year's scenario than they did in 2021, but the Federal Housing Finance Agency said changes were still needed.

Europe’s landmark test of banks’ resilience to global warming was far softer than many lenders had expected, according to people familiar with the matter.

This year’s stress-test results show large banks have more than enough capital to deal with a major economic crisis, but their capital requirements will likely go up anyway. That has some observers and industry officials concerned credit will tighten even as the economy teeters on the edge of recession.

Despite a more rigorous hypothetical stress scenario than last year, each of the 33 banks examined retained far more than their minimum capital requirements in this year’s stress-test results.

U.S. banking giants are poised to return $80 billion to shareholders after this year’s Federal Reserve stress tests, less than last year’s elevated level that followed a pandemic-driven buyback pause.