Fed Board to seek comment on changes to bank stress tests

The Federal Reserve Board reports it will soon seek public comment on significant changes to improve the transparency of its bank stress tests and to reduce the volatility of resulting capital buffer requirements.

The Board intends to propose changes that include, but are not limited to: disclosing and seeking public comment on all of the models that determine the hypothetical losses and revenue of banks under stress; averaging results over two years to reduce the year-over-year changes in the capital requirements that result from the stress test; and ensuring that the public can comment on the hypothetical scenarios used annually for the test, before the scenarios are finalized. These proposed changes are not designed to materially affect overall capital requirements.

For the 2025 stress test, the Board plans to take immediate steps to reduce the volatility of the results and begin to improve model transparency. The Board intends to begin the public comment process on its comprehensive changes to the stress test during the early part of 2025.