The Fed Unveils Details About 2nd Round of Bank Stress Tests

In advance of its first set of "midcycle" bank stress tests, the Federal Reserve has divulged the two scenarios under which the regulator will put big American lenders through their paces.

The first is a "severely adverse" model, in which a spike in national unemployment to 12.5% at the end of 2021 declines to roughly 7.5% by the end of the scenario. Gross domestic product (GDP), meanwhile, falls by around 3% from the third quarter of this year through the fourth quarter of 2021. This is combined with significant economic deceleration.

The second is the "alternative severe" projection. In this model, unemployment peaks at 11% by the end of this year, declining slowly to 9% by the end of the scenario. GDP in this model decreases at a 2.5% clip from Q3 of this year.

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Source Fool.com