Introduction

Large Bank Holding Company Stress Tests

Large Bank Holding Company Stress Tests

There are five different capital ratios under two different scenarios (adverse and severely adverse) that regulators evaluate under the Federal Reserve’s Bank Holding Company (BHC) stress tests. The capital ratios are listed in chart 1 below along with the minimum required to obtain a “well-capitalized” regulatory capital classification.

The key assumptions used for the two scenarios are listed in chart 2. The adverse  scenario reflects a weakened economy; the severely adverse  scenario assumes a deep recession. It is important to note that these are not forecasts. These are simply tests to determine how well our banking system would tolerate another crisis a la 2008.

Under the adverse scenario, projected losses at the 30 BHCs tested total $355 billion through 2015. Those losses rise to $501 billion under the more severe approach. These hypothetical losses would result in considerably lower capital ratios. The chart on page 2 shows the affect that these scenarios would have on the BHC Tier 1 leverage capital ratio. Page 7 lists the 30 BHCs with their bank affiliates.