The Federal Reserve Board on Wednesday finalized changes designed to enhance the transparency and public accountability of its annual bank stress test and to reduce volatility in the stress test-related capital requirements that flow from its results.

The two final rules, announced Wednesday, September 30, 2026, at 9:00 a.m. EDT, are largely similar to the proposed rules the central bank put forward in 2025. Alongside them, the Board also requested public comment on a separate proposal intended to better capture differences in how banks' business models generate fee income.

The Board conducts stress tests to ensure that large banks remain sufficiently capitalized and able to lend to households and businesses even in a severe recession. In December 2024, the Board announced it would modify the test to improve its resilience.

Stress tests have been a pillar of U.S. bank oversight since their introduction in the wake of the 2007-09 financial crisis, and results flow directly into the firm-specific stress capital buffer that banks must hold above minimum requirements. Year-to-year swings in test outcomes have therefore fed through to swings in capital requirements, and smoothing those swings is the stated aim of the averaging rule approved Wednesday.

"The stress test is an essential component of our regulatory capital framework," said Vice Chair for Supervision Michelle W. Bowman. "Today's changes preserve its resilience by ensuring that it is transparent, granular, and risk-sensitive. The public will now have greater assurance that the risks banks take will be reflected appropriately in their stress test losses and their capital requirements."

Annual Public Input and Updated Market Shock Framework

The first final rule requires the Board to invite public input annually on the stress test scenarios and on any material model changes. It also updates the framework that guides the design of the hypothetical scenarios and adopts the models that will be used for the 2027 stress test. In addition, the rule makes several adjustments to the stress test calendar. The annual comment cycle is intended to give banks and the public visibility into scenario design and model changes before those models produce results, rather than after.

The rule further updates the global market shock component, a set of shocks to specific market components applied to banks with large trading books. Under the finalized framework, those banks will be tested against two global market shock components each year, and the Board will use the shock that produces the largest losses for each firm to calculate the firm's stress test results — meaning each trading-heavy firm's results will reflect the more adverse of the two scenarios considered.

Averaging of Stress Capital Buffer Requirements

The second final rule requires the Board, when calculating stress capital buffer requirements, to average the results from the two most recent annual supervisory stress tests for firms that are subject to the test in both years. The Board will begin averaging stress capital buffer requirements in 2028 to ensure that only models incorporating public input are used in the calculation. The timing ties the calculation to the new comment process, so the results entering the average will come from models that have been through public input.

Proposal on Noninterest Income Modeling

The accompanying proposal would request public comment on a revision to the Board's noninterest income model that would improve the stress test's ability to capture business model diversity across firms. If adopted, the adjustments would replace the current noninterest income model, which projects each bank's fee income under stress. Fee income can respond differently to stress than loan losses, and it varies widely with a bank's mix of businesses — the diversity the revision is meant to capture. Comments are due 60 days after publication in the Federal Register, and may be submitted and viewed through the Board's proposal portal.

Taken together, the changes are likely to reduce year-over-year volatility in capital requirements by approximately 50 percent and are not expected to materially affect aggregate capital requirements, according to the Board.

Supporting Documents

The announcement was accompanied by a Board Memo (PDF) and three Federal Register notices: Modifications to the Capital Plan Rule and Stress Capital Buffer Requirement; Enhanced Transparency and Public Accountability of the Supervisory Stress Test Models and Scenarios; and Request for Comment on Model Changes for the Board's 2027 Supervisory Stress Test.

Additional materials include Stress Test Changes and Effective Dates (PDF), a Review of Comments and Summary of Changes to the Proposed Stress Test Models (PDF), the Dodd-Frank Act Stress Tests 2027 page, separate statements by Governor Barr and Governor Cook, and the Board Votes record.

The full press release is available on the Federal Reserve website. Media inquiries may be directed to the Board at 202-452-2955.