Fed Vice Chair for Supervision Michelle Bowman said stress capital buffers will instead be updated in 2027 after public feedback helps address any flaws in testing models.
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The U.S. Federal Reserve
announced on Wednesday it would not adjust large bank capital
levels during the 2026 stress testing cycle, as the central bank
considers several changes to the annual exercise aimed at
boosting transparency.
Fed Vice Chair for Supervision Michelle Bowman said large banks’
“stress capital buffers” will instead be revised in 2027, after
the Fed has had a chance to identify any shortcomings in the
models it uses to test large bank finances against a
hypothetical economic downturn. The Fed voted in October to make
its testing models open to public feedback, as well as the
scenarios they test banks against every year.
“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,” Bowman said in a statement.
The announcement came as the Fed published its scenarios for the
2026 testing cycle, which envisioned a steep increase in
unemployment, severe market volatility, and a steep decline in
asset prices. Last year’s exam found banks were well-positioned
to weather a major downturn and continue lending, as their
capital levels remained well above regulatory minimums.
Banks had long complained that the central bank’s annual
exams were opaque and subjective, particularly since how well
each firm performed determined how much capital they would have
to set aside to guard against potential losses in the coming
year. The Fed’s decision to make its testing models public, and
responsive to public feedback, was a major win for the industry.
Fed Governor Michael Barr, who previously served as the
Fed’s top regulatory official under President Joe Biden,
dissented from Wednesday’s decision, arguing that freezing bank
capital levels could make the stress tests “stagnate,” and
instead the Fed should set capital on the most recent measure of
banks’ risks via the upcoming exam.
Published on February 5, 2026
