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US Banking System’s Possible $541 Billion Loss, Fed implies.


In the released annual bank stress test by the Federal Reserve, result shows that US Banking System could possibly have $541B loss. The US banking system’s stress-test criteria were made prior to the regional bank turbulence in March.

Jerome Powell, Chairman of the Board of Governors of the Federal Reserve System | Photo: USNews

Read More: Treasury Secretary Yellen On Economic Equity

The bank stress test calculates that over half a trillion dollars could exit the US banking system in a “severely adverse” situation. The report also reveals that 23 of the largest US banks would have enough capital to assimilate more than $540 billion in losses and carry on lending to lenders under stressful conditions.

In the report, the US banking system’s losses are comprised of 78% total of losses which is $424 billion losses along with other losses.

The losses in US banking system are comprised of:

  • $424B in loan losses (78% of total losses) on US banking system
  • $18B from loans booked under the fair-value option ( 3% of total losses) on US banking system
  • $94B in losses from “aggregate trading” at 11 of those banks (17% of total losses) on US banking system
  • $5 billion in securities losses, (1% of total losses) on US banking system

The 23 banks stayed above their minimum capital requirements during the hypothetical severe adverse occasion, amidst the estimated US banking system losses of $541 billion, according to the Federal Reserve.

In addition, the Fed said that this year’s stress test factors in a global recession with a drop in commercial real estate prices by 40%; a considerable rise in office vacancies; a 38% drop in house prices; and the unemployment rate mounting by 6.4% to a apex of 10%.

Banks, including JPMorgan Chase & Co, Wells Fargo & Co, and Morgan Stanley, are planning to increase their quarterly divvy after absolving the annual stress test of Federal Reserve’s

READ MORE: Over $541B Could Exit US Banking System In ‘Severely Adverse’ Scenario, Fed Warns

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