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The Fed sees banks will have enough capital to keep lending even if unemployment rises to 10% under a hypothetical scenario

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The Federal Reserve Board on Thursday projected the potential for a rockier road ahead for banks than it did a year ago 

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But said the 33 financial institutions it reviewed passed its annual stress test of capital reserves. 

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The Fed estimated $612 billion in potential losses for banks in its most severe economic scenario 

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Said even if this comes to pass, banks would still be healthy enough to provide loans to homes 

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That’s a $50 billion more-severe loss projection than a year ago by the largest banks. 

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“This year’s hypothetical scenario is tougher than the 2021 test, by design, and includes a severe global recession,” the Fed said in a statement. 

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The Fed’s model included a 5.75% increase in unemployment to 10%, a 40% decline in commercial real estate prices and a 55% drop in stock prices. 

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Under these conditions, the aggregate common equity capital ratio — a cushion against losses — would fall by 2.7% to a minimum of 9.7% 

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The stress test also assumed more than $450 billion in loan losses and $100 billion in trading and counterparty losses. 

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