05:22 PM EDT, 06/26/2024 (MT Newswires) -- The US Federal Reserve said late Wednesday the results of its board's annual stress test of 31 large banks showed the lenders are "well positioned to weather a severe recession and stay above minimum capital requirements" despite enduring steeper losses than last year's stress test.

The test showed the banks remained above minimum common-equity tier 1 capital requirements during the hypothetical recession after absorbing projected hypothetical losses of almost $685 billion.

"The test resulted in higher losses because bank balance sheets are somewhat riskier and expenses are higher," the Fed said in a statement.

Under stress, the aggregate common-equity tier 1 capital ratio, which provides a cushion against losses, is projected to decline to 9.9% from nearly 13%.

"While this is a greater decline than last year's, it is within the range of recent stress tests," the Fed said.

This year's hypothetical scenario, broadly comparable with last year's, included a 40% slump in commercial real-estate prices, a "substantial" increase in office vacancies, and a 36% decline in house prices, the Fed said.

The peak unemployment rate incorporated into the test was 10%, with economic output declining "commensurately."