Fed Finalizes Stress Test Overhaul to Cut Capital Requirement Volatility by 50%

The Federal Reserve on September 30, 2026 finalized changes to its annual large-bank stress tests, aiming to make the exams more transparent and less volatile, the central bank said Wednesday. The revised framework largely mirrors a proposal issued a year earlier following persistent industry complaints that the tests, which determine how much capital large lenders must hold against potential losses, were opaque and subjective. Under the new rules, the Fed will seek public feedback on major changes to its test models and hypothetical economic downturns. Each bank's stress capital buffer—a capital layer based on test performance—will be set as the average of its last two results. The Fed said the changes are likely to reduce year-over-year volatility in capital requirements by 50% without materially affecting aggregate bank capital levels.