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Federal Reserve Board – Federal Reserve Board releases hypothetical scenarios for its 2023 bank stress tests

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February 09, 2023

Federal Reserve Board releases hypothetical scenarios for its 2023 bank stress tests

For release at 4:30 p.m. EST

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 levels—which provide a cushion against losses—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.

BankSubject to global market shockSubject to counterparty defaultSubject to exploratory market shock
Bank of America CorporationXXX
The Bank of New York Mellon Corporation XX
Barclays US LLCXX 
BMO Financial Corp.   
Capital One Financial Corporation   
The Charles Schwab Corporation   
Citigroup Inc.XXX
Citizens Financial Group, Inc.   
Credit Suisse Holdings (USA), Inc.XX 
DB USA CorporationXX 
The Goldman Sachs Group, Inc.XXX
JPMorgan Chase & Co.XXX
M&T Bank Corporation   
Morgan StanleyXXX
Northern Trust Corporation   
The PNC Financial Services Group, Inc.   
RBC US Group Holdings LLC   
State Street Corporation XX
TD Group US Holdings LLC   
Truist Financial Corporation   
UBS Americas Holding LLC   
U.S. Bancorp   
Wells Fargo & CompanyXXX

For media inquiries, please email [email protected] or call 202-452-2955.

Last Update:
February 09, 2023

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