Wall Street road sign [UPI=Yonhap News file photo]

The U.S. Federal Reserve (Fed) announced on the 24th (local time) that it had conducted its annual stress test on major U.S. banks, assuming a severe economic downturn. The results showed that all 32 banks surveyed were in a sufficient position to withstand a severe recession.

The Fed conducted the test based on a hypothetical severe global economic downturn, which included a 10% rise in the unemployment rate, a 39% plunge in commercial real estate values, and a 30% drop in housing prices.

The Fed explained that the stress test results confirmed that even under such hypothetical shock conditions, the banks would meet minimum common equity capital requirements and remain capable of continuing to provide loans to businesses and individuals.

The banks were projected to incur total loan losses of more than $708 billion in the hypothetical scenario, but their capital ratios were evaluated to decline by only 1.6 percentage points overall.

The projected losses included approximately $200 billion in credit card debt losses, approximately $160 billion in commercial and industrial loan losses, and approximately $75 billion in commercial real estate losses.

The Fed clarified that the results of this test do not impact the amount of capital that major banks are required to hold.

Michelle Bowman, a member of the Federal Reserve Board of Governors, stated, "Today's results demonstrate the resilience of the banking system."