Fed reveals the situation of 23 US banks, affirms they are well-positioned to overcome the economic recession

On June 28, the US Federal Reserve (Fed) announced that the country's major banks had successfully completed their annual test on a hypothetical situation of how to overcome a major financial crisis.

Fed cập nhật tình hình các ngân hàng Mỹ, khẳng định

US banks are well positioned to weather a severe economic downturn. (Source: VnEconomy)

The Fed report said the 23 banks examined were “well positioned to weather a severe economic downturn, with the ability to continue lending to households and businesses even during a severe economic downturn.”

The Fed's Vice Chairman for Banking Supervision, Michael Barr, said the test results showed that the US banking system remains strong and resilient.

However, he also noted, supervision will be carried out regularly to ensure that banks are resilient to a range of economic scenarios, market shocks and other stresses.

This year's test assumes that banks will face a severe global recession, significant declines in commercial real estate and home prices, rising office vacancy rates and unemployment peaking at 10%.

Under this scenario, the Fed sees banks' equity-to-total capital structure ratio - a measure of a bank's financial strength, which provides the resources for banks to maintain operations, especially during difficult times - falling by 2.3 percentage points, to 10.1%.

But all 23 banks maintained equity ratios above minimum requirements during the hypothetical recession, despite experiencing total expected losses of more than half a trillion dollars.

The Fed's stress test was "born" after the 2008 financial crisis with the goal of ensuring that banks can "stand firm" against possible "storms".

This year, the test focused on the economic crisis situation, amid widespread turmoil in the financial industry in the US and Europe earlier in the year, caused by the collapse of local lenders in California and Silicon Valley Bank (SVB).

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