DFAST: Tight Credit Card Risk Controls Ensure Bank Liquidity

Top financial institutions are prepared to navigate a severe economic shift, based on the results of the 2025 Dodd-Frank stress tests. Credit card losses continue to be the most significant area of risk, but the current required tests indicate that banks have sufficient liquidity with their Common Equity Tier 1 ratios ready to cover the liquidity risk. For top banks under these conditions, the potential loss ranges from a low of 9.7%, delivered by American Express, to a high of 23.4%, posted by Capital One and Goldman Sachs. Credit card managers should understand the impact of liquidity and credit card risk, which accounts for nearly 40% of loan loss risk if the economy shifts to a severe downturn. 

This Javelin Strategy & Research report reviews the 2025 stress test, which is required for large-bank holding companies and systemically important banks. It explains the significance of credit cards in the overall risk pool and suggests areas that retail bankers should consider in their operational roles. The report explains the functional requirements of stress testing and illustrates how the process affects liquidity.

Key questions discussed in this Credit report: 

• Are financial institutions ready to weather the storm during an economic downturn?
• How significant is the role of credit management in the credit card function?
• Which credit card issuers performed best and worst under the 2025 Dodd-Frank stress tests?
• What can credit card managers do to improve operational performance?
• Who sets the standards for DFAST stress testing? 

Companies Mentioned: 

American Express, Ally Bank, Bank of America, Barclay, BMO, Capital One, Citigroup, Citizens, DB (Deutsche Bank) USA, Discover, FICO, Fiserv, Fifth Third, Goldman Sachs, HSBC, Huntington, JPMorgan Chase, KeyCorp, M&T, Mastercard, PNC, RBC USA, Regions, Santander, TD Group, Truist, UBS Americas, US Bancorp, Visa, Wells Fargo