The Federal Reserve announced the three economic scenarios that will be used to test the strength of the nation’s largest financial institutions.
The baseline scenario represents the current projections for the U.S. economy. In the adverse scenario, there is a weakening in global economic activity that leads to a sudden rise in inflation with a rapid increase in interest rates. The severely adverse scenarios depicts substantial weakening of the global economy, with a significant weakening of the U.S. housing market.
Institutions are required to submit their capital plans by Jan. 7, 2013.