Federal Reserve's annual bank stress test confirms that large banks are well positioned to weather a severe recession and able to continue to lend

All 32 banks survived a hypothetical 10 percent unemployment rate and a 39 percent commercial real estate collapse, and the Fed is holding their capital requirements flat anyway until 2027.

The Federal Reserve said its annual stress test found large banks absorbed more than $708 billion in losses under this year's hypothetical severe global recession while their aggregate capital ratio fell just 1.6 percentage points, leaving every one of the 32 firms above its minimum common equity tier 1 requirement. The scenario modeled a 39 percent drop in commercial real estate prices, a 30 percent decline in house prices and unemployment peaking at 10 percent, with projected losses concentrated in roughly $200 billion of credit card charge-offs, $160 billion from commercial and industrial loans and $75 billion from commercial real estate. "Today's results underscore the strength of the banking system," said Vice Chair for Supervision Michelle W. Bowman, who tied the exercise to a broader push for transparency and public feedback. The results will not change bank capital requirements, which the Board published the same day and will keep in place until 2027, when the test is rerun with loss-estimating models revised in light of that feedback.