Fed to Review Final Bank Stress Test Overhaul Next Week

The Federal Reserve is set to review its final overhaul of the bank stress testing framework next week. The proposal includes calculating large banks' stress capital buffer (SCB) based on the average of the past two annual test results. Michelle W. Bowman, Vice Chair for Supervision at the Federal Reserve, stated during a speech in London on Tuesday that the Fed will review the final version of the stress testing system overhaul within the coming week. Bowman explained that the revision aims to increase transparency, public accountability, model reliability and accuracy while reducing volatility in capital requirements. She noted that averaging the results from two recent tests would halve SCB volatility without significantly changing overall capital levels for large banks.