) -- Analysts at

Goldman Sachs

(GS) - Get Report

expect all banks under their coverage to pass the

Federal Reserve's

2012 stress tests, even though the test assumes more difficult stressed scenarios.

"Reduced leverage, higher quality assets (lower risk,limited/no prop trading) and higher capital levels relative to prior exams should help banks withstand the stress of the Fed's exam," a team of analysts led by Richard Ramsden wrote in a report.

Banks will have to stress test their portfolios assuming an unemployment rate of 13%, a 21% decline in home prices and a 52% peak-to-trough equity market decline, all conditions being tougher than what was simulated in 2011.

Goldman Sachs ran a proprietary stress test on 21 banks, excluding Goldman of course, to simulate the Fed exam . In total, the analysts estimate that given the high levels of capital, the industry has the ability to absorb $900 billion in losses. "As such, all our banks passed our test," the analysts wrote.

In a scenario that sees loss rates as high as 2008/2009 for every quarter through 2013, banks could see an annual charge-off rate of 4%. The average bank could experience 3% to 5% credit-related charges on the total securities portfolio, assuming higher loss rates for structured products of 20%, moderate assumptions for credit-exposed housing related securities of 15% and no loss for safer securities such as Treasuries.

Goldman also stressed the large trading firms could see trading losses of $80 billion from the hypothetical global market shock and additional sovereign losses of $25 billion for the group assuming gross GIIPS exposure is marked down by 30%.

The scenario shows

Bank of America

(BAC) - Get Report

scraping by with a Tier 1 Capital of 5.1%, while


(C) - Get Report


JPMorgan Chase

(JPM) - Get Report

had Tier 1 Capital levels of more than 7% each.

Goldman expects

American Express

(AXP) - Get Report


Wells Fargo

(WFC) - Get Report


Discover Financial Services

(DFS) - Get Report


State Street

(STT) - Get Report


Northern Trust

(NTRS) - Get Report

to be best positioned and should be able to increase capital returns in 2012.

--Written by Shanthi Bharatwaj in New York

>To contact the writer of this article, click here:

Shanthi Bharatwaj


>To follow the writer on Twitter, go to


>To submit a news tip, send an email to:


Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.