STT - Bank stress tests will pose a bigger economic drop from higher starting point in '22
This year's stress tests conducted by the Federal Reserve Board will analyze large banks to determine if they have enough capital to continue operating if the economy should sour. All banks operating in the U.S. with over $100B in assets are required to participate. This year is the first year in which Charles Schwab (NYSE:SCHW) is required to take part. The Fed will subject 34 large banks to its 2022 stress test, using a range of hypothetical scenarios. In the severely adverse scenario, the U.S. unemployment rate rises 5.75 percentage points to a peak of 10% over two years. That scenario also envisions a global recession with heightened stress in commercial real estate prices and corporate debt markets. Specifically, banks will be tested for how they would weather a 40% drop in commercial real estate, widening corporate bond spreads, and collapsing asset, as well as increased market volatility. The scenarios
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Bank stress tests will pose a bigger economic drop from higher starting point in '22