Fed stress test shows US banks can survive severe recession

By Ovunc Kutlu

ANKARA (AA) - The Federal Reserve's annual stress test showed that American banks can survive a hypothetical severe recession in US economy.

"Banks continue to have strong capital levels, allowing them to continue lending to households and businesses during a severe recession," the central bank said Thursday in its stress test results based on a total of 34 banks that participated this year.

"All banks tested remained above their minimum capital requirements, despite total projected losses of $612 billion," it added.

The Fed said the aggregate common equity capital ratio, which provides a cushion against losses in a recession, is projected to decline by 2.7 percentage points to a minimum of 9.7% -- still more than double the minimum requirement.

The central bank said this year's scenario in the stress test is tougher than the one in 2021, as its design includes a hypothetical severe global recession that would especially impact commercial real estate and corporate debt markets.