The Federal Reserve announced on Wednesday that it would conduct annual stress tests on major banks this year, with a focus on real estate market volatility. The tests will also include an exploratory component examining shocks in the non-bank sector and hypothetical losses from large hedge funds.
In the 2025 scenarios, U.S. unemployment is expected to surge to 10%, while home prices decline by 33% and commercial real estate values drop by 30%. This testing framework aims to assess banks’ ability to withstand severe economic downturns and maintain adequate capital reserves.
The Fed plans to introduce changes to reduce volatility in the results and enhance transparency. Further updates are expected soon.
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Source: https://www.reuters.com/markets/us/fed-releases-2025-bank-stress-test-scenarios-2025-02-05