Loan losses represent one of the most critical indicators of financial system health, and stress-testing scenarios provide a clear lens into how institutions might perform under adverse conditions. By examining data from regulatory and internal stress tests, analysts can gauge the resilience of banks and lenders to economic shocks, such as rising unemployment, interest rate fluctuations, or market downturns.
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Data for today’s episode is provided by Javelin Strategy & Research’s Report: DFAST: Tight Credit Card Risk Controls Ensure Bank Liquidity
Top 5 Loan Losses in Stress-Testing Conditions
- Credit cards: $157 billion
- Commercial and Industrial: $124 billion
- Other loans: $78 billion
- Commercial real estate: $52 billion
- Trading: $44 billion
Source: Federal Reserve, Javelin Strategy & Research, 2025
About Report
Leading financial institutions appear well-positioned to withstand a sharp economic downturn, according to findings from the 2025 Dodd-Frank stress testing cycle. While credit card portfolios remain the greatest source of potential losses, current assessments show that banks maintain strong liquidity buffers, with Common Equity Tier 1 ratios sufficient to manage risk exposure. Among major institutions, projected losses range from approximately 9.7% for American Express to as high as 23.4% for Capital One and Goldman Sachs. Because credit card lending represents nearly 40% of potential loan losses in a severe recession scenario, understanding how liquidity and credit risk intersect is critical for credit card portfolio managers.
A recent Javelin Strategy & Research report examines the 2025 stress test requirements for large bank holding companies and systemically important financial institutions. It highlights the growing influence of credit cards within the overall risk landscape and outlines key considerations for retail bankers managing operational and liquidity challenges. The report also details the methodology behind stress testing and its role in evaluating banks’ financial resilience.
