Bank stress tests
My blogg short index
https://englundmacro.blogspot.com/2025/07/my-blogg-short-index.html
Get ready for a share-buyback—and dividend—bonanza.
That’s what analysts predict is coming, after the Federal Reserve found the U.S.'s biggest banks are well positioned to weather a severe downturn, based on its regular stress test.
All 22 banks in this year’s stress test had enough capital to absorb more than $550 billion in losses during a severe downturn, and still continue lending, the Fed said late Friday.
Under the Fed's hypothetical recession scenario, banks’ common equity Tier 1 capital ratio—a key measure of balance-sheet strength which calculates capital against assets—declined 1.8 percentage points.
Lenders would still hold more than double the minimum level required.
Worried About Stocks? $1 Trillion in Buybacks Will Help
Bank stress tests are fun. They are interesting. So is a game of Monopoly. Do not mistake either for reality.
U.S. banks passing after absorbing $685 billion in hypothetical losses, in a severe global recession scenario with a 40% decline in commercial real estate prices and a 36% decline in house prices.
Here’s what he says makes stress tests meaningless:
“Consequences – you can set scenarios, but in the real-world unanticipated consequences make it impossible to fully model outcomes,” 2024.
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