The US Federal Reserve Board has decided to retain existing bank stress capital buffer requirements through 2026, delaying updates until 2027 to incorporate public feedback into revised testing models.
It has set the final hypothetical scenarios for its 2026 stress tests, to measure how well large banks could cope with an intense economic downturn.
A total of 32 banks are included in this year’s test, which will consider the effects of a deep global recession and increased risks in commercial real estate, residential property, and corporate debt.
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The process estimates banks’ losses, revenues, and capital levels if such a scenario were to happen over the next two years.
The Fed emphasises these situations are not economic predictions.
Banks that conduct significant trading or hold large amounts for others must include an additional scenario to estimate losses if their largest counterparty defaults during a sudden market “shock”.
Those with major trading operations will also face a “global market shock” scenario, targeting positions tied to trading activity.
The Fed introduced two adjustments to this component for improved consistency and credibility across similar exposures.
Fed Supervision Vice Chair Michelle W. Bowman said: “Waiting to calculate new stress capital buffer requirements until we receive public feedback will give us the opportunity to correct any deficiencies in our supervisory models based on that feedback.
“This should further improve the transparency, effectiveness, and fairness of our models and improve our accountability to the public.”
Recently, President Donald Trump nominated Kevin Warsh as Federal Reserve Chair while Jerome Powell, the current chair, is under investigation by US prosecutors.
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