The Federal Reserve will show how the capital of 19 U.S. banks might fare through a deep recession and a second housing crisis when stress-test results are released Thursday.
The Fed said in a paper released Monday that it will show firm-specific results for losses, revenues, and capital ratios over a nine-quarter period. The results will be released at 4:30 p.m. Thursday in Washington. Templates included in the Fed release Monday showed an array of categories the Fed plans to disclose, from trading and counterparty losses to credit cards and first-lien mortgages.
The Fed provided the banks with 25 variables, including estimates on gross domestic product, Treasury bill rates and indexes of consumer prices and home prices. The more severe scenario assumes an 8 percent drop in U.S. gross domestic product and an unemployment rate as high as 13 percent. The Fed said the stress scenario doesn’t represent a forecast for the economy.
“The Federal Reserve estimated revenue and losses under the stress scenario based on detailed data provided by the firms and verified by supervisors,” the central bank said in a press release. The Fed said the tests draw on the expertise “of hundreds of staff,” including supervisors, economists, and market analysts.
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