All 32 of the largest U.S. banks successfully passed the Federal Reserve’s annual stress test, the central bank announced Wednesday, signaling that the nation’s banking system would likely withstand a severe economic downturn. The test, mandated by the Dodd-Frank Act, evaluates whether these major financial institutions maintain sufficient capital to absorb significant losses under a hypothetical adverse economic scenario.

The Fed’s 2026 stress test scenario projects a sharp economic contraction, with unemployment rising from 5.5% to 10%, a 4.6% shrinkage in GDP, a 30% drop in housing prices, and a 58% plunge in the stock market. Under these conditions, the 32 banks are estimated to face $708 billion in loan losses. Despite this, their aggregate common equity Tier 1 capital ratio—a key measure of a bank's financial health—would decline modestly from 12.8% to 11.2%. Regulatory requirements mandate that this ratio remain above 4.5%, along with additional buffers tailored to each institution.

The stress test applies to systematically important banks whose failure could disrupt the broader financial system. Institutions that performed poorly in the test risk restrictions on dividend payments, share buybacks, and other capital distributions to ensure financial stability.

Following the Fed’s announcement, JPMorgan Chase disclosed plans to raise its quarterly dividend from $1.50 to $1.65 per share and revealed intentions to repurchase an additional $50 billion of its stock, reflecting confidence in its capital position.

The results reaffirm the resilience of the U.S. banking sector amid potential economic stress, though regulators continue to monitor vulnerabilities in the financial system to mitigate risks of future crises.