Fed Says Banks Can Withstand Economic Downturn

Twenty-two of the largest U.S. banks are well-positioned to endure a severe economic downturn and continue lending, with firms maintaining robust capital levels even after sustaining hundreds of billions of dollars in losses, the Federal Reserve said, Reuters reporters Pete Schroeder and Nupur Anand wrote.

In total, the Fed's scenario projected more than $550 billion in losses, reducing banks' capital levels by 1.8 percentage points. I Photo: Jmswllms0

The results of the U.S. central bank's annual stress test showed banks remain resilient in the face of a hypothetical recession, a surge in unemployment, and market turmoil.

The strong results could prompt banks to increase shareholder payouts through dividends or stock buybacks.

In total, the Fed's scenario projected more than $550 billion in losses, reducing banks' capital levels by 1.8 percentage points.

Even so, firms maintained more than twice the regulatory minimum. On average, banks held an 11.6% common equity Tier 1 capital ratio—well above the 4.5% minimum required.