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Home > News & Events > Press Releases

Press Release
March 07, 2013

Federal Reserve releases summary results of
bank stress tests
For immediate release
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The nation's largest bank holding companies have continued to improve
their ability to withstand an extremely adverse hypothetical economic
scenario and are collectively in a much stronger capital position than
before the financial crisis, according to the summary results of bank
stress tests announced by the Federal Reserve on Thursday.
Reflecting the severity of the stress scenario--which includes a peak
unemployment rate of 12.1 percent, a drop in equity prices of more than
50 percent, a decline in housing prices of more than 20 percent, and a
sharp market shock for the largest trading firms--projected losses at the
18 bank holding companies would total $462 billion during the nine
quarters of the hypothetical stress scenario. The aggregate tier 1
common capital ratio, which compares high-quality capital to riskweighted assets, would fall from an actual 11.1 percent in the third
quarter of 2012 to 7.7 percent in the fourth quarter of 2014 in the
hypothetical stress scenario.
The Federal Reserve's stress scenario estimates are the outcome of
deliberately stringent and conservative assessments under hypothetical,
adverse economic conditions and the results are not forecasts or
expected outcomes.
Despite the large hypothetical declines, the aggregate post-stress
capital ratio exceeds the actual aggregate tier 1 common ratio for the 18

firms of approximately 5.6 percent at the end of 2008, prior to the
government stress tests conducted in the midst of the financial crisis in
early 2009. This is the third round of stress tests led by the Federal
Reserve since the tests in 2009, but is the first year that the Federal
Reserve has conducted stress tests pursuant to the Dodd-Frank Wall
Street Reform and Consumer Protection Act and the Federal Reserve's
implementing regulations.
"The stress tests are a tool to gauge the resiliency of the financial
sector," Federal Reserve Governor Daniel K. Tarullo said. "Significant
increases in both the quality and quantity of bank capital during the past
four years help ensure that banks can continue to lend to consumers
and businesses, even in times of economic difficulty."
For media inquiries, call 202-452-2955
Stress Test Methodology and Results: PDF | HTML

Stress Test Methodology and
Results

Last Update: March 07, 2013

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