US BANks: Stress Test Resilience

Large US banks can absorb a severe recession while continuing to lend, supporting Spectrum’s constructive view despite the test’s non-binding status.

• All 32 banks tested by the Federal Reserve in 2026 stayed above their minimum capital requirements under a scenario including a 39% fall in commercial real estate prices, a 30% fall in home prices, and unemployment peaking at 10%.
• Aggregate CET1 capital declined from 12.8% to 11.2%, a 1.6 percentage-point reduction, but remained above required minimums throughout the scenario.
• Aggregate losses reached $708 billion, of which $625 billion, or 89%, came from loan losses.
• Credit-card loans generated 29% of total losses and commercial and industrial loans 22%; fair-value-option loans, trading and counterparty exposures, and securities losses made up the remainder.
• The 2026 results are non-binding, so banks’ 2025 stress capital buffer levels will remain in force until 2027 while the Federal Reserve gathers feedback and reviews its supervisory models.

Takeaway: The results support investing in large, diversified US banks because they retained capital and lending capacity in a severe downturn, but investors should note that the test does not reset capital-buffer requirements until 2027.