All 32 big U.S. banks pass Fed stress test

The Federal Reserve released results on June 24 showing all 32 of the largest U.S. banks passed its annual stress test. The exercise used a severe recession scenario that assumed unemployment rising to 10%, commercial real estate prices falling 39%, home prices down 30% and roughly $708 billion in losses across the group.

The scenario assumed unemployment climbing from 5.5% to a 10% peak, steep market volatility, and for banks with large trading operations a global market shock plus a sudden default by their largest counterparty. The Fed’s modeled loss breakdown included about $200 billion in credit card losses, roughly $160 billion on commercial and industrial loans and about $75 billion tied to commercial real estate. Modeled losses rose from about $550 billion a year earlier after coverage expanded from 22 banks in 2025 to 32 this year.

After those shocks, the group’s common equity tier 1 ratio fell by 1.6 percentage points but remained above regulatory minimums. The Federal Reserve froze stress capital buffer requirements in February while it updates the models underlying the buffer. Because of that freeze, the 2026 stress-test results will not change how much capital the tested banks are required to hold until the freeze ends in 2027.

Under normal rules, a strong stress-test result can give a bank more room for dividends and share buybacks, while a weak result would reduce that room. Analysts at KBW noted that Morgan Stanley, Citigroup, Citizens Financial and KeyCorp would have experienced the largest hits to their stress capital buffers if this year’s scores had been used to set requirements.

The stress test was created after the 2008 financial crisis under the Dodd‑Frank Act to assess whether large banks could survive severe downturns without taxpayer-funded rescues. A 2018 regulatory change raised the asset threshold for the strictest supervision from $50 billion to $250 billion; that change was cited in post-mortems of mid-sized bank failures that began in 2023.

The 2026 scenario placed particular emphasis on commercial real estate and a higher-for-longer interest rate path. The Fed’s modeling showed how rising unemployment, falling property values and market stress can interact: more job losses produce more loan defaults, lower property values increase losses on real estate lending, and market sell-offs can remove trading revenue that might otherwise cushion losses.

Investors monitor stress-test outcomes for their implications for credit availability and bank valuations. Spot Bitcoin exchange-traded funds recorded $3.4 billion in outflows in one week in early June; many institutional investors hold both bank stocks and these ETFs.

Federal Reserve Vice Chair for Supervision Michelle Bowman described the outcomes as demonstrating that ‘the banking system is resilient.’