Bank stress tests should be transparent—and still demanding.
Predictability can help banks plan. The public also needs confidence that severe risks remain fully tested.
Support transparent stress testing and predictable capital rules, while keeping resilience the overriding test.
What the release says
The Federal Reserve finalized rules adding annual public input on scenarios and material model changes, and averaging two years of stress-test results for certain capital buffer calculations beginning in 2028.
The release also describes two annual global market shock components for large trading banks, using the larger firm-specific loss. A separate fee-income model change is proposed, not finalized.
Read the official release: Federal Reserve Board finalizes changes to enhance the transparency and public accountability of its stress test and reduce volatility in its stress test-related capital requirementsOur centrist perspective
A rule that is easier to understand can be easier to scrutinize. Banks should be able to plan, and outside experts should be able to identify weaknesses in supervisory models. Public input is therefore a worthwhile goal.
Our concern is that predictability must not become the policy’s only measure of success. Stress testing exists to ask whether banks can continue to serve households and businesses under severe conditions. Smoother annual requirements are useful only if they preserve adequate protection against emerging risks.
The Fed should explain how it will monitor whether averaging responds slowly to sudden deterioration. We would judge the changes by performance under difficult conditions, rather than by whether regulated institutions welcome them.
The tradeoffs
More transparency can improve accountability, but could also make a test easier to anticipate. Supervisors should examine that possibility.
Averaging may make planning easier; it may also smooth a warning signal that deserves immediate attention. The direction of that effect must be tested, not assumed.
What to watch next
- How the new scenarios and models perform in 2027.
- Evidence that capital remains sufficient as risks change.
- The final decision on the separately proposed fee-income model.
This is an editorial interpretation, not an official agency statement. Factual summaries rely on the linked release; implications and recommendations are our opinion. How we work