WASHINGTON, D.C. — The Board of Governors of the Federal Reserve System adopted a final rule on October 1, 2026, amending the calculation of the stress capital buffer requirement for large bank holding companies and other supervised institutions. The final rule calculates a firm's stress capital buffer requirement using the average of the maximum common equity tier 1 capital ratio declines projected in each of the Board's prior two annual supervisory stress tests.

Results averaging for the stress capital buffer requirement will begin with requirements effective on January 1, 2029. The annual effective date of the stress capital buffer requirement is extended by one quarter to January 1. The final rule was published in the Federal Register on October 2, 2026, and is effective 60 days after publication. The final rule amends 12 CFR Parts 225, 238, and 252.

The Board adopted changes to the FR Y-14A/Q/M reports to collect additional net income data. Revisions to FR Y-14A/Q/M reporting forms will be effective for the June 30, 2027, report date. The final rule removes the phase-in of highly material supervisory model changes from the Stress Testing Policy Statement.

Why It Matters

The final rule reduces the volatility of annual changes in stress capital buffer requirements, based on staff analysis comparing recent stress testing cycles. The Federal Reserve Board delayed the implementation of results averaging for stress capital buffer requirements until January 1, 2029, to ensure that models used in the calculation incorporate public input, as noted in the final rule document. Primary source: federalreserve.gov

The Federal Reserve Board has historically used stress tests to evaluate the resilience of large banks, with the first major stress test program, the Supervisory Capital Assessment Program (SCAP), launched following the financial crisis. The events described span multiple years.

Timeline

On October 1, 2026, the Board of Governors of the Federal Reserve System adopted a final rule amending the calculation of the stress capital buffer requirement for large bank holding companies, savings and loan holding companies, U.S. intermediate holding companies of foreign banking organizations, and nonbank financial companies supervised by the Board. The Board of Governors of the Federal Reserve System filed the final rule on October 1, 2026. The Board adopted changes to the FR Y-14A/Q/M reports to collect additional net income data to improve the accuracy of the stress capital buffer requirement calculation.

What's New

The Board of Governors of the Federal Reserve System adopted the final rule based on a proposed rule issued in April 2025, which aimed to reduce volatility in stress capital buffer requirements by averaging results from the two most recent annual supervisory stress tests. The Federal Reserve System's Stress Testing Policy Statement previously included a phase-in period for highly material supervisory model changes, which the final rule eliminated to improve transparency and reduce complexity in capital requirement calculations. The Federal Reserve Board's decision to remove the phase-in of highly material supervisory model changes from the Stress Testing Policy Statement aims to streamline the process and improve consistency in stress test outcomes. The Federal Reserve Board's final rule to average stress test results for capital buffer calculations was first proposed in April 2025, as part of a broader effort to enhance transparency and reduce volatility in capital requirements. The Federal Reserve Board's final rule was adopted after considering public comments, including requests for firms to have an option to opt into results averaging before the averaging goes into effect for all firms, though such an option was not included in the final rule. Primary source: federalreserve.gov