The Federal Reserve Board finalized two rules on September 30, 2026, to enhance the transparency and public accountability of its supervisory stress tests and reduce volatility in stress test-related capital requirements. The changes, largely similar to proposed rules from 2025, are intended to ensure large banks remain sufficiently capitalized during severe economic downturns.
The first final rule requires the Board to invite public input annually on the stress test scenarios and any material model changes. It also updates the framework for designing hypothetical scenarios and adopts the models to be used for the 2027 stress test. The rule adjusts the stress test calendar and updates the global market shock component. Banks with large trading books will now be tested against two global market shock components each year, with the results producing the largest losses used to calculate the firm's stress test results.
The second final rule mandates that the Board average the results from the two most recent annual supervisory stress tests when calculating stress capital buffer requirements. This averaging process will begin in 2028 to ensure that only models incorporating public input are used in the calculation. The Board also requested public comment on a proposal to revise the noninterest income model to better capture differences in banks' business models that generate fee income.
The Board stated that these 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. Comments on the proposed model changes are due 60 days after publication in the Federal Register.
