FRB Reports 2020 Supervisory Stress Test Results

The Federal Reserve Board ("FRB") reported results from the 2020 Dodd-Frank Act stress test (a/k/a "DFAST 2020"). The FRB found that that, despite suffering substantial losses under a "severely adverse" scenario, large banks "could continue lending to businesses and households."

As previously covered, the stress tests involved large banking organizations with assets totaling more than $100 billion. The tests employed a "baseline" scenario using average projections from surveys of economic forecasters, and a "severely adverse" scenario involving a serious global recession in which U.S. unemployment increases to ten percent and the corporate debt markets and commercial real estate experience elevated stress. Banks with large trading operations were required to include a global market shock component in their scenarios, and firms with significant trading or processing operations were required to use a counterparty default scenario component.