Deciphering the Fed's Stress Tests

The Supervisory Capital Assessment Program: Design and Implementation

The stress tests were conducted over most of the past two months on the 19 largest BHCs in the U.S., which “collectively hold two-thirds of the assets and more than one-half of the loans in the U.S. banking system, and support a very significant portion of the credit intermediation done by the banking sector,” according to the Fed’s white paper. Based on estimates of loan losses and revenue, revised for the two SCAP scenarios, bad recession and worse recession, the Fed has projected pro-forma capital requirements looking forward for two years.