The Federal Reserve on Thursday said that the largest U.S. banks are likely strong enough to survive the coronavirus crisis but warned a prolonged economic downturn could saddle them with hundreds of billions of dollars in losses on soured loans.

In a worst-case scenario, in which unemployment remains high and the economy doesn’t bounce back for a few quarters, the 33 largest U.S. banks could be hit with as much as $700 billion in loan losses, the Fed said in its annual stress test. That would erode the capital buffers meant…

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