The Federal Reserve announced on Friday that all 22 of the nation’s largest banks successfully passed its 2025 stress test, maintaining adequate capital buffers even under a hypothetical recession scenario. However, analysts noted that this year’s exam was less demanding than previous iterations, CNBC reports.

The central bank’s simulated downturn included milder assumptions compared to 2024--featuring smaller declines in housing and commercial real estate prices, a more moderate unemployment spike, and reduced overall market disruption.

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The report adds that these factors likely contributed to the more favorable outcomes for major financial institutions.

Michelle Bowman, the Fed’s newly appointed vice chair for supervision and a President Donald Trump appointee, said in a statement, “Large banks remain well capitalized and resilient to a range of severe outcomes,” CNBC adds

The scenario estimated roughly $550 billion in total losses across the tested firms, yet all remained above regulatory minimums.

Unlike last year’s exam, which included steeper declines and more severe economic pain points, the 2025 version omitted deeper stress on private equity holdings and did not evaluate exposure to private credit markets--a rapidly growing $2 trillion segment.

Fed officials offered limited explanation for the shift, only citing past volatility in test outcomes and a plan to seek public input for future revisions.

Notably absent from the 2025 methodology was any direct testing of bank vulnerabilities to private credit. Despite recent warnings from Fed researchers--including the Federal Reserve Bank of Boston--about the systemic risks private credit could pose in a sharp downturn, the Fed’s stress test documents made no reference to the sector.

Top-tier institutions such as JPMorgan Chase & Co. (NYSE:JPM), Goldman Sachs Group Inc. (NYSE:GS), Citigroup Inc. (NYSE:C), and Bank of America Corp. (NYSE:BAC) were among those that cleared the exam.

Their solid performance positions them to resume capital return programs, including dividend payouts and share buybacks, with announcements expected next week, the report adds.

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