The Federal Reserve's annual stress tests revealed that all 22 major banks passed, indicating resilience in the banking sector despite a less stringent evaluation this year compared to previous years. The tests suggested that banks would withstand approximately $550 billion in theoretical losses, with milder economic downturn scenarios than in earlier tests. The Fed attributed the less vigorous tests to a weakened global economy and plans to modify testing methodologies moving forward. Notably, banks were not assessed on their exposure to private equity and credit, raising concerns about potential risks in those untested areas.
All 22 banks tested this year would have remained solvent and above the minimum thresholds to continue to operate, despite absorbing roughly $550 billion in theoretical losses.
The Fed said it went with a less vigorous test because the global economy has weakened since last year, leading to fewer severe outcomes in their projections.
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