In a Severe Recession, Large Banks Could Incur $541 Billion of Loan Losses. It's Not an Issue.
If the country were to enter a severe recession, the Federal Reserve projects that the 23 largest banks operating in the U.S. would incur $541 billion of loan losses, for a total projected loss rate of roughly 6.4%. Projected loss rates on commercial real estate (CRE) office properties would be nearly three times higher than what was seen during the Great Recession.
And yet, the biggest banks would hardly flinch, maintaining strong levels of capital despite an incredibly difficult environment.
Given the wave of bank failures earlier this year, the Fed's annual stress test was a worry for many bank management teams. But when the results were released Wednesday, it turned out that, by and large, they had little to fear. Let's see why.
Source Fool.com
