The Federal Reserve finalizes annual stress test scenarios and maintains current capital requirements until 2027

The Federal Reserve Board on Wednesday finalized the assumptions for its annual stress test scenarios to ensure that large banks can continue lending to households and businesses during a severe economic downturn. These scenarios are largely consistent with the proposals put forward in October 2023. In addition, the Federal Reserve voted to maintain the current Stress Capital Buffer requirements until 2027, at which point new requirements will be calculated based on public feedback. Vice Chair Michelle W. Bowman stated that this move will improve the transparency and fairness of the models. This year’s stress test will assess the resilience of 32 banks under a global severe recession scenario, including an unemployment rate rising to 10%, a 30% drop in housing prices, and a 39% decline in commercial real estate prices.