Large U.S. banks pave the way for dividends and buybacks through Federal Reserve stress tests.

All large banks in the United States have passed the annual stress test by the Federal Reserve, paving the way for these banks to increase buybacks and dividends. The stress test aims to assess how Wall Street banks would perform in the event of a shock to the financial system. Unlike previous years, the results of the 2026 test will not affect capital requirements, as the Federal Reserve is currently revising the testing mechanism to make it more bank-friendly. In a statement on Wednesday, the Federal Reserve said that, given this decision, "it does not anticipate that these institutions will delay disclosures of their planned capital actions until a specific time point ending in the third quarter of 2027." This year's test evaluated the resilience of 32 large banks in a severe global economic shock scenario, with assumptions of high pressure on commercial and residential real estate markets and the corporate bond market. The scenario includes a severe global economic recession, a 39% drop in commercial real estate prices, a 30% drop in residential prices, and a peak unemployment rate of 10%, with corresponding declines in economic output. The Federal Reserve stated: "Although in this year's hypothetical scenario, the banking system as a whole would incur more than $708 billion in loan losses, overall capital would only decrease by 1.6 percentage points, still above the minimum capital requirement."