Fed to Finalize Bank Stress-Test Reforms for Greater Transparency

The Federal Reserve is preparing to finalize two rules covering transparency in bank stress testing and the calculation of stress capital buffers. Michelle Bowman said Friday the changes would make the process more transparent and predictable while reducing swings in the capital requirements imposed on large banks. Under the reforms, the Fed would publish detailed information on stress-test models, including their equations, variables, assumptions, limitations and decision-making rationale. Stress capital buffers would be calculated using the average results of two consecutive annual stress tests, and the effective date of the resulting requirement would move from Oct. 1 to Jan. 1. Bowman said the approach is expected to reduce stress capital buffer volatility by half without materially changing aggregate capital requirements. The 2026 stress-test cycle will assess 32 large banks under a severe recession scenario that includes a global market shock. Existing stress capital buffer requirements will remain unchanged until 2027. The reforms are to be finalized in the coming weeks. No contested claims found.