Skip to navigationSkip to main contentSkip to right columnADVERTISEMENTBy Pete SchroederTue, June 23, 2026 at 12:06 PM GMT+2 4 min readBy Pete SchroederWASHINGTON, June 23 (Reuters) - The U.S. Federal Reserve is due to release the results of its annual bank health checks on Wednesday at 4:00 p.m. ET (2000 GMT).Under the "stress test" exercise, the Fed tests big banks' balance sheets against a hypothetical scenario of a severe economic downturn, the elements of which change annually. Usually, the results are a big deal because they dictate how much capital those banks need to set aside to be healthy, and how much they can return to shareholders via share buybacks and dividends.Coming amid a sweeping overhaul of capital rules led by President Donald Trump's bank regulators, this year's tests will not change capital levels, although they will still offer insight into the health of the banking system.Here's what you need to know:WHY DOES THE FED 'STRESS TEST' BANKS?The Fed established the tests following the 2007-2009 financial crisis as a tool to ensure banks could withstand a similar shock in future.The tests formally began in 2011, and large lenders initially struggled to earn passing grades. Citigroup (C.N), Bank of America (BAC.N), JPMorgan Chase & Co (JPM.N), and Goldman Sachs Group (GS.N), for example, had to adjust their capital plans to address the Fed's concerns. Deutsche Bank's U.S. subsidiary failed in 2015, 2016 and 2018.However, years of practice have made banks more adept at the tests and the Fed also has made the tests more transparent. It ended much of the drama of the tests by scrapping the "pass-fail" model in 2020 and introducing a more nuanced, bank-specific capital regime.HOW ARE BANKS ASSESSED?The test assesses whether banks would stay above the required 4.5% minimum capital ratio - which represents the percentage of its capital relative to assets - during the hypothetical downturn. Banks that perform strongly typically stay well above that. The nation's largest global banks also must hold an additional "G-SIB surcharge" of at least 1%.How well a bank performs on the test also dictates the size of its "stress capital buffer," an additional layer of capital introduced in 2020 which sits on top of the 4.5% minimum.That extra cushion is determined by each bank's hypothetical losses. The larger the losses, the larger the buffer.This year's test, which applies to 32 banks, includes a severe global recession, and heightened stress in commercial and residential real estate markets. Banks with large trading operations are also tested against a global market shock, as well as the surprise default of their largest counterparty.Terms and Privacy PolicyPrivacy & Cookie SettingsMore Info