Exactly one year ago, in July 2024, Goldman Sachs faced a stark shortfall, needing over $6 billion in additional capital to pass the Federal Reserve’s annual stress test. This July, the very same bank sits on an excess of over $15 billion. The shift is not a quirk of accounting but the direct result of a dramatic reduction of over $20 billion in projected stress test losses compared with last year.The Federal Reserve subjects major US banks to an annual set of stress tests to simulate severe adverse scenarios in both economic and market conditions. The results determine how much capital a bank must hold. Losses can be trimmed in two broad ways: by Fed adjusting the severity of the test scenarios themselves, or by Bank materially changing its risk exposures. This year, the Fed has done the former.
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