Fed’s Covid scenarios far harsher than latest stress tests
Under worst-case, 25% of banks would have post-stress CET1 ratios of less than 4.8%
Recession simulations run by the Federal Reserve to gauge banks’ resilience to the coronavirus crisis projected much higher losses than the worst-case scenario used by the agency in its latest round of stress tests.
The severely adverse scenario used in the Dodd-Frank Act Stress Tests (DFAST), results for which were released yesterday (June 25), projected a peak-to-trough fall in banks’ aggregate Common Equity Tier 1 (CET1) capital requirements of 210 basis points. The three alternate
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