DBRS Morningstar: Federal Reserve Stress Tests Highlight CRE Risk

This commentary reviews CCAR and Commercial Real Estate.

Key highlights include:

• All 34 banks in this year's iteration cleared the Federal Reserve stress tests.

• This year's stress test included heightened stress scenarios, especially around CRE. Next to credit cards, CRE had the highest loss levels of any asset class.

• Preliminary stress capital buffers (SCB) have also been released with most banks remaining at 2.50%.

“While the most recent round of Federal Reserve stress testing, showed all banks subject to the tests readily passing, they also highlighted potential risks in certain loan portfolios including commercial real estate” said John Mackerey, Senior Vice President, – Global FIG.