Through stress testing, the Federal Reserve checks whether America’s biggest banks have enough capital after major economic setbacks. The decisions also determine the minimum buffers that banks must maintain.

The crisis situations in which the central bank operates vary from year to year. This year, the regulator is examining, among other things, what effect a rise in unemployment above 6 percent would have on banks’ balance sheets. The central bank is also exploring the implications for banks of a 40 percent drop in commercial real estate prices. The central bank also examines what a shock to international financial markets would look like for banks with large trading branches.

31 banks

31 banks were raided this year. This is more than last year when there were 24 banks. This is because banks with balance sheets of $100 billion to $250 billion are added every two years.

“Though the intensity of the stress test this year was similar to last year, the test resulted in large losses due to risky balance sheets and high costs,” Barr said, adding that all banks are well capitalized.

Credit cards and loans

The higher risks are mainly for customers with credit cards and business loans. Additionally, higher costs mean less profit from commissions, making it more difficult to recoup losses, for example, according to the central bank.

CET1 capital ratio, a key indicator for banks, tested at 9.9 percent this year. It was 12.7 percent in the previous year. The minimum requirement is 4.5 percent.

The annual stress test was introduced after the Great Financial Crisis between 2007 and 2009, which led to great unease about the survival of banks. The central bank wants to restore confidence by regularly checking whether buffers are strong enough.