Predicting the stressed expected loss of large U.S. banks

•The stressed expected loss (SEL) is the capital shortfall of a commercial bank in a market downturn.•A market downturn is simulated as a negative shock on interest rate and credit market risk factors that reflect a bank’s market-sensitive assets.•SEL as the difference between the mark-to-market value of the assets in the downturn and the book value of the liabilities.•Individual SEL predicts the loss of capital projected by banks in a severely adverse scenario and aggregate SEL predicts macroeconomic variables.