The Federal Reserve announced on Wednesday it would be testing big banks against heightened stress in commercial and residential real estate markets as part of the U.S. central bank's annual stress tests. The Fed added that the annual exams would include an additional exploratory component that would examine shocks in the non-bank sector, as well as the impact of hypothetical shocks of numerous large hedge funds on big bank finances. The new scenarios largely track with prior year scenarios from the Fed that examine how large banks are situated to weather severe economic downturns, and in turn dictate how much capital they must set aside against potential losses.
