Federal Reserve Board to seek public comment on 2026 stress testing model changes and scenario design reforms

The Federal Reserve Board published welcome remarks by Vice Chair for Supervision Michelle W. Bowman signalling that the Board plans to solicit public comment later this month on a package of reforms to its stress testing program, with an emphasis on greater transparency around the process and outcomes. The proposed package is expected to provide detailed descriptions of supervisory models, including assumptions, limitations, and the rationale for key modelling choices, and to request feedback on modelling changes the Board plans to implement for the 2026 stress test. Proposed areas include adjustments affecting the sensitivity of pre-provision net revenue projections to recent bank performance and changes to models covering credit losses, operational risk, and securities. The consultation is also set to cover scenario design, including guides for variables in the severely adverse macroeconomic scenario, the macroeconomic model used to generate paths for variables not set by a guide, and disclosures on the global market shock framework such as shock severity, liquidity horizons, and the models used to generate shocks. The proposal will additionally seek comment on the severely adverse scenario the Board intends to use for the 2026 stress test, with the Board aiming to ensure substantive changes are informed by public input prior to adoption.