Fed Gives Big Banks Stress Test Breather: Paperwork Relief
Published Date: 4/22/2025
Proposed Rule
Summary
Big banks and certain financial companies will see a smoother way to calculate their stress capital buffer, which helps them stay safe during tough times. The rule changes spread out the calculation over two years and push the deadline to January 1, giving firms more breathing room. These tweaks won’t raise costs but will cut down on paperwork and improve data accuracy.
Analyzed Economic Effects
5 provisions identified: 5 benefits, 0 costs, 0 mixed.
Two‑Year Averaging of Stress Results
The rule would calculate a firm's stress capital decline component by averaging the maximum common equity tier 1 capital declines from the current and prior year's supervisory stress tests. This change would apply beginning with the stress capital buffer requirement following the 2025 supervisory stress test (i.e., averaging the 2024 and 2025 results), preserve the 2.5 percent risk-weighted assets floor for the stress capital buffer requirement, and is estimated to reduce volatility in requirements by about 17 percent overall and about 44 percent for global systemically important banks (GSIBs).
Shift Annual Effective Date to January 1
The proposal would move the annual effective date of the stress capital buffer requirement one quarter later, from October 1 to January 1, giving firms additional time to comply with their updated buffer requirements. The change is intended to provide firms more breathing room to meet requirements after supervisory stress test results are released.
FR Y-14 Reporting Changes to Improve Accuracy
The rule would modify the FR Y-14A/Q/M reporting forms to collect additional net income composition data and remove data items no longer needed for the supervisory stress test. Firms with over $100 billion in total consolidated assets are required to submit FR Y-14 reports and would provide the revised data to improve stress test projections and reduce reporting burden.
Symmetric Averaging for Increases and Decreases
The proposal applies averaging symmetrically to both increases and decreases in a firm's stress capital decline component so that year-to-year rises and falls are both smoothed. The Board states symmetric averaging better preserves predictability and avoids lowering average resilience that could occur if averaging applied only to increases.
Dividend Add‑On and Reconsideration Rules Preserved
The dividend add-on component would continue to be updated annually and would not be included in the two-year averaging. Firms would still be able to revise planned dividends after receiving a preliminary stress capital buffer and may request reconsideration of the current cycle's stress capital decline within fifteen calendar days of receiving the preliminary requirement (but not of prior years' declines).
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Key Dates
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