Of the 18 banks tested, only Ally Financial Inc. would be at risk of failure under the Fed's scenario, underscoring the improving financial condition of the banking industry.

Fed officials emphasized that banks could not pass or fail this set of stress tests because they did not take into account some important factors. Next week, the Fed will give what amounts to a pass/fail grade for the banks based on additional information.

At the lowest point in the severe-recession scenario, Ally would fall well below the minimum level using a key Fed measure. That gauge - the ratio of the bank's capital to its risk-weighted assets - would drop to 1.5 percent for Ally. The minimum level is 5 percent.

For each of the other large banks, that ratio would stay above 5 percent. And taken together, the firms - which account for 70 percent of all U.S. banking assets - would be at 7.7 percent at the end of the nine-quarter deep-recession scenario.

That's below the banks' combined 11.1 percent as of Sept. 30, but well above the approximately 5 percent level at the end of 2008 in the midst of the financial crisis, Fed officials said.

"The stress tests are a tool to gauge the resiliency of the financial sector," said Fed board member Daniel K. Tarullo. "Significant increases in both the quality and quantity of bank capital during the past four years help ensure that banks can continue to lend to consumers and businesses, even in times of economic difficulty."

Thursday's results are the first in a two-step process this year that will take into account each bank's plans to pay dividends and buy back stock - both of which affect how much capital it has on hand to withstand a future deep economic downturn.

The stress test results will be applied to each bank's plans.