Overview
- The Federal Reserve published a proposal to release the back-end models behind its annual bank stress tests and said the board will vote on it later Friday.
- The draft rule would disclose equations, variables and coefficients, detail the scenario design process and preview future scenarios for public comment through January 22, 2026.
- Vice Chair for Supervision Michelle Bowman, who has pushed for reforms, said the program has suffered from limited transparency and excessive year-to-year volatility without a meaningful appeals process.
- Governors Christopher Waller and Stephan Miran voiced support for greater transparency, Chair Jerome Powell noted the commitment to improved disclosure, and Governor Michael Barr opposed the package as weakening the test and potentially lowering capital.
- Analysts say a more predictable regime could let banks hold less excess capital and more confidently allocate funds to lending, dividends or share buybacks, a change long sought by industry groups that sued over the prior approach.