Fed finalizes stress-test transparency and capital-buffer averaging rules
The Federal Reserve finalized stress-test transparency and capital-buffer averaging rules aimed at reducing volatility in large banks’ capital requirements.
The Federal Reserve Board on Wednesday finalized two rules designed to make its annual supervisory stress test more transparent and to smooth year-to-year swings in large banks’ stress capital buffer requirements.
In a press release dated Sept. 30, 2026 and timed for 9:00 a.m. EDT, the Board said the package is largely similar to proposals issued in 2025. Taken together, the changes “are likely to reduce year-over-year volatility in capital requirements by approximately 50 percent and are not expected to materially affect aggregate capital requirements,” according to the Board.
The first final rule requires the Board to invite public input each year on stress-test scenarios and any material model changes. It also updates the framework that guides the design of hypothetical scenarios and adopts the models that will be used for the 2027 stress test. Several calendar adjustments are included as well.
For banks with large trading books, the rule updates the global market shock component. Those firms will now be tested against two global market shock components each year, and the Board will use the shock that produces the largest losses for each firm when calculating that firm’s stress-test results.
The second final rule changes how stress capital buffer requirements are calculated. Starting in 2028, the Board will average results from the two most recent annual supervisory stress tests for firms that took the test in both years. The Board said averaging begins in 2028 so that only models that have incorporated public input are used in the buffer calculation.
Vice Chair for Supervision Michelle W. Bowman framed the package as preserving the test’s resilience while improving accountability. “The stress test is an essential component of our regulatory capital framework,” Bowman said in the release. “Today’s changes preserve its resilience by ensuring that it is transparent, granular, and risk-sensitive. The public will now have greater assurance that the risks banks take will be reflected appropriately in their stress test losses and their capital requirements.”
Separately, the Board requested public comment on a proposal to revise its noninterest income model so the stress test better captures differences in how banks generate fee income. If adopted, the adjustments would replace the current model that projects each bank’s fee income under stress. Comments are due 60 days after publication in the Federal Register.
The Board’s stress tests are intended to ensure that large banks remain sufficiently capitalized and able to lend to households and businesses even in a severe recession. In December 2024, the Board had announced it would modify the test to improve its resilience; Wednesday’s finalization is the formal endpoint of that redesign track for the transparency and buffer-averaging pieces.
Wire coverage, including Reuters, framed the action as an overhaul of the bank stress-test regime with implications for how large U.S. banks plan capital. This article is limited to the Board’s stated rules and estimates; it does not forecast individual bank capital ratios or recommend securities.
Supporting materials linked from the Board release include Federal Register notices on capital-plan and stress-capital-buffer modifications, enhanced transparency of supervisory stress-test models and scenarios, a request for comment on 2027 model changes, and documents summarizing stress-test changes and effective dates.
