On September 30, 2026, the Federal Reserve finalized two changes to its annual bank stress-test framework. The changes make more of the process open to public input and smooth some year-to-year movements in banks’ stress capital buffers. The Fed estimates that the package could reduce annual volatility in those capital requirements by about 50%, while not materially changing their aggregate level.
What the final rules change
First, the Fed must invite public input each year on its stress-test scenarios and on material changes to its models. The rule also updates the framework used to design hypothetical scenarios, adopts the models planned for the 2027 test, and adjusts the testing calendar.
For banks with large trading books, the global market shock portion of the test will include two shock components each year. The Fed will use whichever component produces the larger losses for each firm when calculating that firm’s test results. This is a stress-testing method; it does not describe a forecast or an actual market event.
How stress capital buffers will be averaged
The second final rule changes how the stress capital buffer is calculated for firms tested in two consecutive years. Instead of relying on only the latest annual result, the Fed will average results from the two most recent supervisory stress tests. The averaging begins in 2028, so the calculation will use models that have incorporated public input.
A stress capital buffer is one part of a bank’s regulatory capital requirement. Averaging two annual results is intended to reduce sharp changes from one test year to the next. The Fed says the rules are expected to lower year-over-year volatility by approximately half; it does not expect a material change in aggregate capital requirements.
A separate proposal is still open for comment
The Fed also requested comments on a proposed revision to its noninterest-income model, which estimates banks’ fee income under stress. The proposal is intended to better reflect differences among banks’ business models. This item is a request for comment, not one of the two finalized rules. The comment period closes 60 days after the proposal is published in the Federal Register.
What to watch next
For readers following bank regulation, the next useful checkpoints are the annual public-input process, the details of the 2027 model and scenario framework, and the eventual outcome of the separate fee-income-model proposal. The Fed’s estimate concerns the volatility of stress-test-related capital requirements; it should not be read as a prediction of bank earnings, share prices, or lending outcomes.
Source: Federal Reserve Board, September 30, 2026.
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