On June 27, the Fed released the results of its annual supervisory stress test, evaluating how large banks would perform under hypothetical adverse economic conditions. The Fed conducts stress tests annually as part of its bank supervision. The 2025 results were that all 22 of the banks tested remained above minimum capital requirements, even after absorbing total projected hypothetical losses of more than $550 billion. While the 2025 scenario was less severe than 2024’s, three main factors influenced the results of this year’s test: (1) lower loan losses due to the less severe nature of the test; (2) lower private equity losses because the Fed adjusted how these exposures are treated by the test; (3) higher bank profitability over the past year; and (4) atypical trading positions from certain banks driven by unusual client behavior in early October 2024.

As previously covered by InfoBytes, the Fed released the hypothetical scenarios for its 2025 annual stress test last February with the aim to ensure that large banks could continue lending during severe economic downturns.