Fed Finalizes 2026 Bank Stress Scenarios, Freezes Capital Buffers Until 2027
The central bank will hold banks’ stress capital buffers at current levels to gather public input that will shape updated supervisory models.
Overview
- The 2026 test will evaluate 32 large banks against a severe global recession in which U.S. unemployment rises to 10% and house and commercial real estate prices fall roughly 30% and 39%, respectively.
- The Board voted to keep stress capital buffer requirements unchanged through 2026, with new requirements to be calculated in 2027 after incorporating public feedback.
- Vice Chair for Supervision Michelle W. Bowman said the pause is intended to fix any model deficiencies and increase transparency, effectiveness, and fairness.
- Firms with significant trading or custodial operations must include a largest-counterparty default, and trading banks will face a global market shock updated with two revisions to improve consistency and plausibility.
- Governor Michael Barr dissented, arguing that freezing capital levels could cause the tests to stagnate and that requirements should reflect the most recent assessment of banks’ risks.