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The most severe hypothetical scenario projects $383 billion in loan losses at the 34 participating bank holding companies during the nine quarters tested. The "severely adverse" scenario features a severe global recession with the U.S. unemployment rate rising by approximately 5.25 percentage points to 10 percent, accompanied by heightened stress in corporate loan markets and commercial real estate.
The firms' aggregate common equity tier 1 capital ratio, which compares high-quality capital to risk-weighted assets, would fall from an actual 12.5 percent in the fourth quarter of 2016 to a minimum level of 9.2 percent in the hypothetical stress scenario. Since 2009, the 34 firms have added more than $750 billion in common equity capital.
"This year's results show that, even during a severe recession, our large banks would remain well capitalized," Governor Jerome H. Powell said. "This would allow them to lend throughout the economic cycle, and support households and businesses when times are tough." [...]
In addition to releasing results under the severely adverse hypothetical scenario, the Board on Thursday also released results from the "adverse" scenario, which features a moderate recession in the United States. In this scenario, the aggregate common equity capital ratio of the 34 firms fell from an actual 12.5 percent in the fourth quarter of 2016 to a minimum level of 10.7 percent.
Related press release: Federal Reserve releases results of Comprehensive Capital Analysis and Review (CCAR)