Big banks all pass the Federal Reserve's stress tests, but the tests were less vigorous this year

[BumRushDaShow]

Source: AP

Updated 5:19 PM EDT, June 27, 2025


NEW YORK (AP) — All the major banks passed the Federal Reserve’s annual “stress tests” of the financial system, the central bank said Friday, but the test conducted by the central bank was notably less vigorous than it had been in previous years.

All 22 banks tested this year would have remained solvent and above the minimum thresholds to continue to operate, the Fed said, despite absorbing roughly $550 billion in theoretical losses. In the Fed’s scenario, there would be less of a rise in unemployment, less of a severe economic contraction, less of a drop in commercial real estate prices, less of a drop in housing prices, among other metrics compared to what they tested in 2024.

All of these less harmful, but simulated, drops mean there would be less damage to these banks’ balance sheets and less risk of these banks of potentially failing. Since the banks passed the 2024 tests, it was expected that the banks would pass the 2025 tests.

“Large banks remain well capitalized and resilient to a range of severe outcomes,” said Michelle Bowman, the bank’s vice chair for supervision, in a statement. An appointee of President Trump, Bowman became the Fed’s vice chair of supervision earlier this month.

Read more: https://apnews.com/article/bank-stress-tests-federal-reserve-private-credit-jpmorgan-citigroup-bd4c6049c0f060a6e43ec3aa229c22af

[moniss]

1. The folly of the "stress test" is the false sense of security

it gives. I think that is by design. The current exposure in CDO's and other exotic financial instruments is in the many,many trillions of dollars. The laughable amount of $550 billion wouldn't scratch the surface of meeting obligations and therefore the scenario would be one of two things. Either total collapse or another bailout. Given the way the banks were literally given money at 0% interest and literally no accountability for the executives who caused the collapse during the W Presidency, and given that as massive of a collapse as it was, there is literally no conceivable way that amounts thousands of times greater in bad debt wouldn't collapse the worldwide economy in a far more dramatic manner than the last time.

[BumRushDaShow]

3. The original stress tests took a hit and were revised under the last GOP trifecta in 2018

So many of the "Regional" banks, that tend to be the first to collapse, were exempted from doing any testing due to not meeting the new minimum threshold.

S.2155 - Economic Growth, Regulatory Relief, and Consumer Protection Act

(snip)

TITLE IV--TAILORING REGULATIONS FOR CERTAIN BANK HOLDING COMPANIES

(Sec. 401) The bill amends the Financial Stability Act of 2010, with respect to nonbank financial companies supervised by the FRB and certain bank holding companies, to:

increase the asset threshold at which certain enhanced prudential standards shall apply, from $50 billion to $250 billion, while allowing the FRB discretion in determining whether a financial institution with assets equal or greater than $100 billion must be subject to such standards;
increase the asset threshold at which company-run stress tests are required, from $10 billion to $250 billion; and
increase the asset threshold for mandatory risk committees, from $10 billion to $50 billion.

(snip)

[Passages]

2. Design the tests for less scrutiny, who would want that? Who benefits?

Hard questions? Nope.

[Javaman]

4. Yeah, "tests"

Whistling a fine tune past the graveyard