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A coalition of financial services trade associations urged the Federal Reserve Board (FRB) to take prompt, interim steps that clarify the operation of the 2025 stress test cycle and related stress capital buffer (SCB) requirements to avoid unnecessary uncertainty. The associations include the Financial Services Forum, American Bankers Association, Bank Policy Institute, and Securities Industry and Financial Markets Association.
On April 17th, the FRB proposed changes to the stress testing regime effective for 2025 which include averaging stress capital buffer requirements and a change in the effective date of the requirements, with comments due on June 23rd. In a joint letter, the associations explained that since a final rule will not be in place by the time that stress test results are released on June 30th, firms will be unable to accurately communicate their tentative stress capital buffers or capital actions.
To address this issue, the associations recommend the FRB take action prior to the 2025 stress test results that allows firms to base their upcoming SCB solely on their 2025 stress test results to ensure accurate SCB calculations, provide reliable dividend payment disclosures, and prevent public confusion.
“To avoid introducing additional uncertainty regarding the SCB requirement, which would be inconsistent with the Proposal’s stated purpose, we urge that the FRB, no later than 14 calendar days before the scheduled date for the announcement of 2025 stress testing results, publicly announce that firms will be permitted to operate under the existing SCB framework through September 30, 2026, regardless of whether the FRB adopts revised SCB mechanics in a final rule with an effective date in that window,” the associations stated.
The full letter can be found here.
