Economy
Fed sets stress-test changes to halve capital requirement volatility
The Federal Reserve finalized stress-test changes designed to reduce capital requirement volatility for large banks by approximately 50 percent.
What happened
The Federal Reserve finalized two rules requiring annual public input on stress-test scenarios and model changes, while updating scenario design, the 2027 models, testing calendar, and market-shock framework. From 2028, banks tested in two consecutive years will have stress capital buffers based on the average of both results. The changes are expected to reduce year-over-year volatility by about 50 percent.
Why it matters
Large banks should face more stable stress-test-related capital requirements, while aggregate capital requirements are not expected to change materially. Public input will have a formal annual role.
Source: U.S. Federal Reserve