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31 Major U.S. Banks Pass Annual Fed Stress Test, Paving Way for Higher Payouts Amid Severe Recession

Jun 26, 2024, 08:33 PM

The Federal Reserve announced that all 31 major U.S. banks have passed the annual stress test, indicating they are well-positioned to withstand a severe recession. Despite facing higher losses than in 2023 due to riskier balance sheets and increased expenses, the banks remain above the minimum capital requirements. This successful performance paves the way for higher shareholder payouts and comes as the industry anticipates a less stringent proposal for capital requirements. The stress tests demonstrated that the banks could endure a hypothetical recession and continue lending to households and businesses, withstanding an estimated $685 billion in losses. The annual ritual showed banks could handle severe economic turmoil, with implications for stocks like $SPY and $XLF.