Why Trump just gave America’s banks the answers to a crucial test

June 25, 2026 — 11:58am

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America’s biggest banks have just been stress-tested. Not surprisingly, they have passed with flying colours and now plan to shower their shareholders with increased dividends and share buy-backs.

The 32 banks sailed through the tests, first implemented in 2009 after the global financial crisis tore holes in big bank balance sheets.

Their supervisor, the US Federal Reserve Bank, said on Wednesday that, under its scenario – a severe global recession, significant declines in commercial property and housing prices and rising unemployment – the banks would have lost a total of only $US708 billion ($1.03 trillion) and their capital would have shrunk by only 1.6 per cent.

That they passed the test isn’t a surprise because not only has the Trump administration made it less stringent, but last year the Fed, after intense lobbying and threatened legal action against the tests by the banks, gave them access to the scenarios it would use and the models it uses to calculate their impacts on the banks.

In effect, the examiner gave the banks its questions in advance of the exam.

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Even had a bank or banks failed the test, it wouldn’t have impacted the amounts of capital the banks would be required to hold because the Fed has frozen the current stress capital buffer until 2027 as it continues to change, not just the stress tests themselves, but the wider capital and liquidity requirements regime.

The administration, from the moment Donald Trump regained office, made it clear it wanted to wind back the intensity of bank supervision and the bank prudential requirements that were imposed globally in the wake of the 2008 crisis – a crisis triggered by sub-prime lending within the US.

International banks are in the midst of what has been labelled the “Basel III Endgame,” or the final tranche of bank regulation that has been co-ordinated by the........

© The Sydney Morning Herald