The Federal Reserve has released parameters for its annual industry stress test showing smaller hypothetical shocks to the US economy, sending bank stocks soaring. The 2025 exam has smaller spikes in unemployment and declines in stock and real estate values than previous versions.
Analysts say the changes signal a friendlier regulatory regime under the Trump administration, with big banks set to face less stringent requirements. Industry trade groups had sued the Fed over the exam, but the latest iteration is more predictable and transparent.
As a result, some analysts predict that banks will be able to hold smaller capital cushions later this year. Bank of America’s Ebrahim Poonawala said the changes increase his confidence in regulatory relief for banks, citing a shift towards a balanced and more transparent regime.
Source: https://www.cnbc.com/2025/02/06/bank-stocks-fed-stress-test.html