The Federal Reserve has released new hypothetical scenarios for its upcoming round of stress testing in 2021.
The Fed conducts stress testing every year on the largest banks with a presence in the U.S. in order to ensure the safety and soundness of the banking system.
The exercise puts each bank through a hypothetical economic scenario to see how its balance sheet would hold up during a severe economic downturn. The goal is to make sure that individual banks could not only survive, but that they would also be able to keep lending to individuals, families, and businesses during a downturn.
