Recently, the Fed released the 2024 Federal Reserve Stress Test Results and found that the tested banks have “sufficient capital” to absorb losses and weather a recession while staying above minimum capital requirements. The Fed tested 31 large banks this year and found those banks have enough capital to absorb a projected $685 billion in losses and remain above their minimum capital requirements. While the Fed found a 2.8 percent decline in the aggregate capital ratio (greater than last year’s decline of 2.5 percent), the decline was within the range of recent stress tests. The Fed attributed this 2024 change to three factors:

1. The Fed projected greater credit card losses due to a substantial increase in banks’ credit card balances, along with higher delinquency rates. In the stress test, banks were projected to lose $175 billion on credit cards, which was 17.6 percent of credit card balances.
2. The Fed projected higher corporate losses due to banks having riskier corporate credit portfolios.
3. The Fed projected a decline in net revenue. The Fed found that noninterest expenses (compensation, real estate, etc.) continued to increase, while noninterest income sources (e.g., investment banking fees) declined significantly.

Despite these factors, the Fed concluded that large banks could still lend to households and businesses while remaining “well above” minimum capital requirements.