Federal Reserve Alert! The Fed releases hypothetical scenarios for its 2023 bank stress tests.

For the first time, this year's stress test will feature an additional exploratory market shock to the trading books of the largest and most complex banks, with firm-specific results released.

Press release: https://www.federalreserve.gov/newsevents/pressreleases/bcreg20230209a.htm

Source: 2023 Stress Test Scenarios (PDF)

Related Content: Dodd-Frank Act Stress Tests 2023

The Federal Reserve Board on Thursday released the hypothetical scenarios for its annual stress test, which helps ensure that large banks are able to lend to households and businesses even in a severe recession. This year, 23 banks will be tested against a severe global recession with heightened stress in both commercial and residential real estate markets, as well as in corporate debt markets.

The Board's stress test evaluates the resilience of large banks by estimating losses, net revenue, and capital levelsโ€”which provide a cushion against lossesโ€”under hypothetical recession scenarios that extend two years into the future. The scenarios are not forecasts and should not be interpreted as predictions of future economic conditions.

In the 2023 stress test scenario, the U.S. unemployment rate rises nearly 6-1/2 percentage points, to a peak of 10 percent. The increase in the unemployment rate is accompanied by severe market volatility, a significant widening of corporate bond spreads, and a collapse in asset prices.

In addition to the hypothetical scenario, banks with large trading operations will be tested against a global market shock component that primarily stresses their trading positions. The global market shock component is a set of hypothetical shocks to a large set of risk factors reflecting market distress and heightened uncertainty.

For the first time, this year's stress test will feature an additional exploratory market shock to the trading books of the largest and most complex banks, with firm-specific results released. This exploratory market shock will not contribute to the capital requirements set by this year's stress test and will be used to expand the Board's understanding of the largest banks' resilience by considering more than a single hypothetical stress event. The Board also will use the results of the exploratory market shock to assess the potential of multiple scenarios to capture a wider array of risks in future stress test exercises.

The table below shows the components of the test that apply to each bank, based on data as of the third quarter of 2022. Table 1 in the scenario document has additional information.
r/Superstonk - Federal Reserve Alert! The Fed releases hypothetical scenarios for its 2023 bank stress tests. For the first time, this year's stress test will feature an additional exploratory market shock to the trading books of the largest and most complex banks, with firm-specific results โ€ฆ
r/Superstonk - Federal Reserve Alert! The Fed releases hypothetical scenarios for its 2023 bank stress tests. For the first time, this year's stress test will feature an additional exploratory market shock to the trading books of the largest and most complex banks, with firm-specific results โ€ฆ

โ€ข Stress Test Methodology provides comprehensive details about the models and methodologies used in the stress test. Stress Test Methodology is typically published at the end of the first quarter.

โ€ข Stress Test Results reports the aggregate and individual bank results of the stress test, which assesses whether banks are sufficiently capitalized to absorb losses during a severe recession. Stress Test Results is typically published at the end of the second quarter.

โ€ข Large Bank Capital Requirements announces the individual capital requirement for all large banks, which are partially determined by the results of the stress test. Large Bank Capital Requirements is typically published during the third quarter.

r/Superstonk - Federal Reserve Alert! The Fed releases hypothetical scenarios for its 2023 bank stress tests. For the first time, this year's stress test will feature an additional exploratory market shock to the trading books of the largest and most complex banks, with firm-specific results โ€ฆ
r/Superstonk - Federal Reserve Alert! The Fed releases hypothetical scenarios for its 2023 bank stress tests. For the first time, this year's stress test will feature an additional exploratory market shock to the trading books of the largest and most complex banks, with firm-specific results โ€ฆ
r/Superstonk - Federal Reserve Alert! The Fed releases hypothetical scenarios for its 2023 bank stress tests. For the first time, this year's stress test will feature an additional exploratory market shock to the trading books of the largest and most complex banks, with firm-specific results โ€ฆ
r/Superstonk - Federal Reserve Alert! The Fed releases hypothetical scenarios for its 2023 bank stress tests. For the first time, this year's stress test will feature an additional exploratory market shock to the trading books of the largest and most complex banks, with firm-specific results โ€ฆ
r/Superstonk - Federal Reserve Alert! The Fed releases hypothetical scenarios for its 2023 bank stress tests. For the first time, this year's stress test will feature an additional exploratory market shock to the trading books of the largest and most complex banks, with firm-specific results โ€ฆ
r/Superstonk - Federal Reserve Alert! The Fed releases hypothetical scenarios for its 2023 bank stress tests. For the first time, this year's stress test will feature an additional exploratory market shock to the trading books of the largest and most complex banks, with firm-specific results โ€ฆ
r/Superstonk - Federal Reserve Alert! The Fed releases hypothetical scenarios for its 2023 bank stress tests. For the first time, this year's stress test will feature an additional exploratory market shock to the trading books of the largest and most complex banks, with firm-specific results โ€ฆ
r/Superstonk - Federal Reserve Alert! The Fed releases hypothetical scenarios for its 2023 bank stress tests. For the first time, this year's stress test will feature an additional exploratory market shock to the trading books of the largest and most complex banks, with firm-specific results โ€ฆ
r/Superstonk - Federal Reserve Alert! The Fed releases hypothetical scenarios for its 2023 bank stress tests. For the first time, this year's stress test will feature an additional exploratory market shock to the trading books of the largest and most complex banks, with firm-specific results โ€ฆ
r/Superstonk - Federal Reserve Alert! The Fed releases hypothetical scenarios for its 2023 bank stress tests. For the first time, this year's stress test will feature an additional exploratory market shock to the trading books of the largest and most complex banks, with firm-specific results โ€ฆ
r/Superstonk - Federal Reserve Alert! The Fed releases hypothetical scenarios for its 2023 bank stress tests. For the first time, this year's stress test will feature an additional exploratory market shock to the trading books of the largest and most complex banks, with firm-specific results โ€ฆ
r/Superstonk - Federal Reserve Alert! The Fed releases hypothetical scenarios for its 2023 bank stress tests. For the first time, this year's stress test will feature an additional exploratory market shock to the trading books of the largest and most complex banks, with firm-specific results โ€ฆ

Half glass full, at least all of this isn't [REDACTED]?

r/Superstonk - Federal Reserve Alert! The Fed releases hypothetical scenarios for its 2023 bank stress tests. For the first time, this year's stress test will feature an additional exploratory market shock to the trading books of the largest and most complex banks, with firm-specific results โ€ฆ

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