The new Federal Reserve stress-test scenarios for the largest U.S. bank holding companies toughen the scenario from 2019 in some ways and revise other aspects of the severely-adverse scenario to big-bank benefit.  As we noted in our in-depth report, each big BHC’s results under the new scenarios will vary considerably, but only those with major trading-book exposure to low-quality corporate debt are likely to feel a pinch that redefines either credit allocation or planned capital distributions.  Thus, we see little in the scenario that would force banks going forward to alter course on residential finance, although multi-family might feel a bit of a chill.

The full report is available to subscription clients. To find out how you can sign up for the service, click here.