All of the major banks in the United States have successfully cleared the Federal Reserve's annual stress test.

WASHINGTON: The Federal Reserve announced on Wednesday that all major banks in the United States have successfully passed its annual stress test, designed to evaluate their resilience in the face of a major financial crisis.

According to the report published by the Fed, all 23 banks tested were deemed to be well-prepared to withstand a severe recession and maintain their lending capacity to both households and businesses.

These test results come in the wake of recent banking turbulence witnessed in the United States and Europe, triggered by the sudden collapse of Silicon Valley Bank (SVB), a regional lender based in California.

SVB faced a bank run as depositors grew concerned about the repercussions of rapidly increasing interest rates.

In a statement, Michael Barr, the Fed's Vice Chair for Supervision, affirmed, "Today's results confirm that the banking system remains strong and resilient." However, he cautioned against complacency, emphasizing the ongoing need to fortify banks against various economic scenarios, market shocks, and other stresses.

It is important to note that smaller local and mid-sized regional banks were exempted from these stress tests.

This year's assessment involved a hypothetical scenario of a severe global recession, significant declines in commercial real estate and housing prices, a substantial increase in office vacancies, and a sharp rise in the unemployment rate peaking at 10 percent.

Despite projected total losses exceeding half a trillion dollars, the Fed found that all 23 banks remained above their minimum capital requirements and maintained an aggregate equity-to-capital ratio of 10.1 percent, with a marginal decline of 2.3 percentage points.

Rob Nichols, President of the American Bankers Association, commented in a statement that these test results affirm the strength of American banks. He also highlighted the substantial capital reserves built by these institutions, enabling them to continue lending and supporting the economy even under the most severe economic conditions.