Fed Vice Chair for Oversight Michelle Bowman said the stressed capital buffers will instead be updated in 2027 after public feedback addresses any shortcomings in the test models. | Photo credit:
Fed Vice Chair for Oversight Michelle Bowman said big banks’ “stress capital buffers” will instead be reviewed in 2027, after the Fed has had a chance to identify any flaws in the models it uses to test big banks’ finances against a hypothetical economic downturn. The Fed voted in October to open its testing models to public feedback, as well as the scenarios it tests banks against each year.
“Waiting to calculate new stress capital buffer requirements until we receive public feedback will give us an opportunity to correct any deficiencies in our supervisory models based on that feedback,” Bowman said in a statement.
The announcement came as the Fed released its scenarios for the 2026 testing cycle, which projected a sharp rise in unemployment, severe market volatility and a sharp decline in asset prices. Last year’s survey found that banks were well positioned to weather a major downturn and continue lending as their capital levels remained well above regulatory minimum levels.
Banks had long complained that the central bank’s annual surveys were opaque and subjective, especially as each company’s performance determined how much capital they had to set aside to protect against potential losses in the coming year. The Fed’s decision to make its test models public and respond to public feedback was a major win for the industry.
Fed Governor Michael Barr, who previously served as the Fed’s top regulator under President Joe Biden, disagreed with Wednesday’s decision. He argued that freezing banks’ capital levels could “stagnate” stress tests, and that the Fed should instead set capital based on the latest measure of banks’ risk through the upcoming study.
Published on February 5, 2026
#Fed #keeping #banks #capital #buffers #stable #stress #test #overhaul