JPMorgan Chase, Bank of America and a collection of their peers all passed the Federal Reserve's annual stress tests, a widely expected outcome after regulators last year began disclosing the exam's scenarios and models in advance.

The Fed on Wednesday said that big banks were equipped to weather severe economic headwinds. After putting banks through a hypothetical situation where a severe global recession leads to significant declines in commercial real estate and house prices and rising unemployment, bank capital fell only slightly, staying well above the minimum level at which the Fed considers banks to be safe.

Big banks responded with buybacks and dividend hikes, with JPMorgan saying it would repurchase $50 billion in shares and Morgan Stanley saying it planned to repurchase $20 billion worth. Wells Fargo and Goldman Sachs announced dividend increases, but no immediate buybacks.

As a group, the banks would have faced $708 billion in total loan losses under the stress tests. Still, capital declined in aggregate only 1.6%, the smallest reduction of any test in the last seven years, thanks to projected interest rate income.

The results won't come as a surprise. Acting under legal pressure, the Fed in late 2024 said it would begin releasing the scenarios and the models they use to calculate how well banks fare in any given hypothetical. Critics of the move have accused the Fed of giving away the answers to its own test before it happens.

The scenario this year was also similar to last year's, and the Fed announced in advance that it wouldn't affect banks' capital buffers, given ongoing plans to change the exam. Normally, individual results from the test are used to determine how much more capital a bank must hold -- known as the stress capital buffer.

To defend against economic downturns, banks are required to hold a certain amount of capital in reserve instead of lending it out to generate profits. The annual stress test looks at what would happen to banks under adverse conditions. This year, 32 banks were put to the test, including a number of large regional banks that aren't subject to the test every year.

The Trump administration, in an effort to boost the economy, launched a series of deregulatory reforms benefiting financial firms, including changes to other rules around the capital that banks must hold. Officials argue the changes will get banks back into areas of business that they had retreated from, including corporate loans and home mortgages.

For several quarters, the largest banks have trumpeted big profits and said they planned to put money to work in new loans -- but also more stock buy backs and acquisitions. JPMorgan Chief Executive Jamie Dimon last month said that the bank was looking at acquisitions worth up to $20 billion in the next few years now that it has greater flexibility from regulators to spend capital.

Write to Dylan Tokar at dylan.tokar@wsj.com

(END) Dow Jones Newswires

June 24, 2026 18:02 ET (22:02 GMT)

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