(The Epoch Times)—All 22 of the largest U.S. banks have passed the Federal Reserve’s latest annual stress test, demonstrating their ability to withstand a hypothetical financial crisis and paving the way for potential increases in shareholder payouts.
In results released on June 27, the Fed said that under a “severely adverse” scenario—including a sharp global recession and surging unemployment to 10 percent—the banks would collectively suffer losses exceeding $550 billion. Despite such a heavy hit, their core capital buffers—measured by the common equity tier 1 capital ratio (CET1)—would fall by only 1.8 percentage points and still remain well above regulatory minimums.
On average, banks maintained a CET1 capital ratio of 11.6 percent, comfortably higher than the 4.5 percent regulatory floor. This capital ratio is critical because it acts as a cushion to absorb losses during severe downturns.
“Large banks remain well capitalized and resilient to a range of severe outcomes,” the Fed’s Vice Chair for Supervision, Michelle Bowman, said in a statement.
This year’s stress test scenario envisioned a steep global recession, featuring a 30 percent drop in commercial real estate prices, a 33 percent decline in house prices, and a nearly 6 percentage point spike in the unemployment rate to a peak of 10 percent. Economic output was projected to contract sharply under these conditions, which also assumed significant financial market turmoil, including a 50 percent plunge in equity prices and a sharp selloff in corporate bonds, with spreads on investment-grade debt widening to 5 percent.
Among the projected losses in this year’s stress test, credit card losses accounted for $157 billion, while losses on commercial and industrial loans totaled $124 billion, and commercial real estate loan losses reached $52 billion.
The stress test results play a critical role in determining the minimum capital levels banks must hold relative to their risk-weighted assets, serving as a key safeguard for financial stability. Many banks typically announce dividend plans and share buybacks shortly after the release of stress test results.
While severe, this year’s stress test scenario was somewhat less seismic than the 2024 version. This reflects the countercyclical design of the Fed’s stress testing framework, which becomes harsher during periods of economic growth and eases slightly when the economy is already under strain. The Fed also noted that year-to-year volatility in stress test results has been driven by model sensitivities and other factors, leading to fluctuations in projected capital requirements.
To address these fluctuations, the Fed is considering a rule that would average stress test results over two consecutive years. According to Bowman, this change aims to reduce “excessive volatility” and provide a more stable and reliable gauge of banks’ capital adequacy.
The proposed rule, which also includes easing regulatory reporting requirements, comes as the Trump administration pursues efforts to reduce regulatory burdens in support of economic growth and investment.
As part of this broader push, the Fed and other federal banking regulators announced plans this week to revise the enhanced supplementary leverage ratio, a key post-crisis safeguard that requires the largest global banks to hold capital against all assets, regardless of risk.
At a public board meeting on June 25, Fed governors voted 5–2 to advance a plan to replace the existing flat leverage buffer—which stands at 2 percent at the parent company level and 6 percent at the subsidiary level—with a variable buffer tied to each bank’s systemic risk score. The goal is to reduce regulatory disincentives for holding low-risk assets like U.S. Treasurys and to ensure banks can function effectively as intermediaries in the Treasury market, especially during periods of market stress when liquidity is vital.
At Last, a Company With Integrity in the Gold IRA Industry
For several years, I’ve been vetting out precious metals companies in search of the best. I believe in gold and silver but it’s hard to find integrity in the Gold IRA industry. The vast majority operate with shady tactics and gigantic spreads that take advantage of Americans who simply want to protect their life’s savings.
I’ve found a handful that I like and I’ve worked with some of them. By no means would I “unrecommend” them because, again, I vetted them out and found them to be above the fold. Unfortunately, it isn’t hard to be better than the rest when the rest are so darn awful.
After years of searching, I finally found a company that truly operates with integrity. Augusta Precious Metals has three important attributes that set them far above the competition:
- Non-Commissioned Sales Team: I cannot stress how important and unique this is. With just about every other company in the Gold IRA industry, the sales teams make commission from every account they open. This means they steer their clients toward the gold and silver products with the highest commission. With Augusta Precious Metals, the team is solely focused on putting the best gold and silver for their clients into their IRA. They get paid to serve the best interests of the Gold IRA client, NOT their own commission pay.
- Incredibly Low Fees: Most Americans would be shocked if they knew the spread other Gold IRA companies charge. Augusta charges just 5% versus up to 45% elsewhere.
- No Pressure, No Gimmicks: There’s an understanding among most in the Gold IRA industry that fear and pressure is the way to go. Augusta Precious Metals takes a sober approach when working with clients because they hold integrity in the highest possible regard. This is why they don’t offer gimmicks like “free” or “bonus” silver. It’s also why they do not apply pressure tactics to get quick sales. Their educational and transparent approach to doing business is exceedingly rare in the Gold IRA industry.
