Fed Stress Tests: US Banks Would Lose $708bn in Crash
Get the Finance newsletter
Daily finance — markets, central banks, M&A, the prints that move money. Free.
- The Federal Reserve's 2026 stress tests found the 32 largest US banks would lose more than $708bn in a modeled economic collapse, with total equity capital declining 1.6 percentage points — the slimmest fall in at least seven years.
- The hypothetical scenario assumed a global recession, 10% unemployment, and a 30% drop in home prices, producing roughly $200bn in credit card losses, $75bn in commercial real estate losses, and over $150bn in corporate loan losses.
- Fed vice-chair for supervision Michelle Bowman said the results "underscore the strength of the banking system," and the central bank issued passing grades to all 32 banks, including JPMorgan Chase, Bank of America, and Goldman Sachs.
- JPMorgan announced it would raise its quarterly dividend to $1.65 per share from $1.50 and authorized a new $50bn stock buyback program, while Goldman Sachs lifted its common dividend from $4.50 to $5.00 per share.
- Morgan Stanley increased its quarterly dividend to $1.15 per share from $1.00 and reauthorized a multi-year $20bn buyback program; BNY (+19%), Citi (+12%), and Wells Fargo (+11%) also announced dividend increases.
- The Fed is freezing last year's stress capital buffers regardless of this year's results as it reviews the overall stress test process following a lawsuit by bank lobby groups, with current buffers remaining in place until 2027.
- The Fed's supervisory staff is being trimmed by 30% under Bowman's leadership, with the reorganization set to take effect July 12, and the central bank is also implementing Basel Endgame reforms that would sharply cut capital requirements for the largest banks.
Why it matters: The 2026 stress test produced the lowest capital impact in at least seven years, and the Fed is freezing last year's buffers through 2027 while pursuing Basel Endgame reforms that would sharply cut capital requirements. The combination let banks announce a wave of dividend hikes and buybacks — JPMorgan alone authorized a new $50bn repurchase program.
Ask SkimNews
