Loan losses: Banks’ estimates out of sync with Fed’s

Wells Fargo worst performer in latest DFAST exercise

The eight too-big-to-fail US banks significantly underestimated the losses that would be stemming from their loan books in the event of a severe recession, Risk Quantum analysis shows.

On aggregate, the eight lenders projected loan losses to the tune of $164.2 billion under this year’s Federal Reserve Dodd-Frank Act Stress Test, $69.1 billion short of the central bank’s estimate.

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