The Federal Reserve recently released its hypothetical scenarios for 2023 bank stress testing. Every year, the Fed puts the largest, most complex, and systemically important banks through a hypothetical set of adverse economic scenarios to see how bank balance sheets and capital levels would hold up.

Introduced as part of Dodd-Frank legislation following the Great Recession in 2007-09, the goal of stress testing is to make sure banks can withstand a severe economic shock and still be able to lend to individuals, families, and businesses. But investors also watch stress testing because it plays a key part in determining bank capital requirements. The more capital banks hold, the weaker their returns are and the less capital they can return to shareholders.

In this year's stress-testing scenario, the Fed threw banks another curveball. Let me explain.

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Source Fool.com