Fed Methodology for Stress Tests

On March 12, the Fed described its methodology for the stress tests in the 2012 Comprehensive Capital Analysis and Review.  The supervisory stress scenario, which is not the Fed’s forecast for the economy, depicts a severe recession in the U.S., including a peak unemployment rate of 13%, a 50% drop in equity prices, and a 21% decline in housing prices.  The results for the 19 bank holding companies that participated in the tests will be released on March 15.  Fed Release.