Stress tests expose deep cracks in credit cards

The scale of the exposure

The Federal Reserve projects that in a severe global recession, credit card losses at large United States banks would reach $203.0 billion. This figure accounts for 29 percent of all projected losses across the 32 institutions subjected to the central bank’s annual stress test.

While commercial real estate often dominates discussions of financial vulnerability, the numbers reveal a different hierarchy of risk. Projected losses for domestic commercial real estate stand at $76.5 billion.

The mechanics of the stress

The Federal Reserve designs its severely adverse scenario to test how capital levels hold up against rapid economic deterioration. The 2026 test assumes the unemployment rate climbs 5.5 percentage points to reach a peak of 10 percent.

As employment falls, unsecured consumer debt historically defaults at high rates. The Federal Reserve calculates an aggregate projected loss rate of 17.1 percent for credit card portfolios across the tested banks.

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Source institutions：U.S. Federal Reserve

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