Ladies and Gentlemen:
The Bank Policy Institute[1] and the U.S. Chamber of Commerce[2] submit this letter in response to the Board of Governors of the Federal Reserve System’s notice of proposed rulemaking relating to the Federal Reserve’s stress capital buffer requirement[3]
In light of the current flaws in the stress testing framework, which result in considerable volatility in the SCB and overall capital requirements, we urge the Federal Reserve to expeditiously adopt a final rule on the averaging proposal. As described in Section II.B, given the significant uncertainty introduced by the proposal’s comment period ending immediately before firms receive their 2025 stress tests results and—in accordance with well-established market conventions—announce their indicative SCBs and planned capital distributions, we also urge the Federal Reserve to announce (prior to firms receiving their results of the 2025 stress tests) that firms will be permitted to operate under the existing SCB framework through September 30, 2026. Doing so would eliminate considerable uncertainty in firms’ capital planning processes and avoid the introduction of additional volatility in SCBs. We also urge the Federal Reserve to include asymmetric averaging in the final rule and allow, but not require, a firm to opt in to the revised SCB framework prior to October 1, 2026. Because of the existing deficiencies in the stress testing models and scenario development, discussed in Section I below, it is essential that the Federal Reserve implement the averaging proposal with our proposed changes to mitigate the volatility resulting from these deficiencies for the 2025 stress testing cycle.
The proposal represents a constructive first step in the Federal Reserve’s efforts to improve its overall stress testing framework and bring the framework into compliance with the law, but there is more work to be done. Accordingly, in response to Question 1 of the proposal and the Federal Reserve’s stated intention to engage in additional rulemakings related to the stress testing framework, this letter begins with non-exhaustive general comments on the stress testing framework and then provides comments on the specific revisions to the framework and focused questions in the proposal.
To read the full comment letter, please click here, or click on the download button below.
[1] The Bank Policy Institute is a nonpartisan public policy, research and advocacy group that represents universal banks, regional banks, and the major foreign banks doing business in the United States. The Institute produces academic research and analysis on regulatory and monetary policy topics, analyzes and comments on proposed regulations, and represents the financial services industry with respect to cybersecurity, fraud, and other information security issues.
[2] The U.S. Chamber of Commerce is the world’s largest business federation. It represents approximately 300,000 direct members and indirectly represents the interests of more than three million businesses and professional organizations of every size, in every industry sector, and from every region of the country.
[3] See Federal Reserve, Modifications to the Capital Plan Rule and Stress Capital Buffer Requirement, 90 Fed. Reg. 16,843 (Apr. 22, 2025).
