International Swaps and Derivatives Association and SIFMA seek transition to September 2026 and broader reforms in Federal Reserve stress capital buffer proposal

The International Swaps and Derivatives Association (ISDA) and the Securities Industry and Financial Markets Association (SIFMA) submitted a comment letter on the Federal Reserve Board of Governors’ proposal to revise the capital plan rule and the stress capital buffer (SCB). The associations welcomed the Board’s effort to reduce SCB volatility by averaging SCB results over a two-year period, but argued the proposal does not address more fundamental drivers of volatility and miscalibration, including implausible supervisory stress scenarios and overlaps with the risk-based capital framework. ISDA and SIFMA recommended that banking organizations in the 2025 stress testing cycle be permitted to keep SCB requirements determined under the current SCB rule through September 30, 2026, regardless of whether the proposal is finalized with an effective date on or prior to October 1, 2026. They also asked that, if a final rule becomes effective on January 1, 2026, it clarify that the SCB requirement effective through September 30, 2026 would apply through December 31, 2026. The letter proposed adopting asymmetric averaging of two-year supervisory stress test results, removing the dividend add-on component from supervisory stress tests, and reforming the supervisory stress testing framework to reflect post-crisis reforms and to reduce conceptual inconsistencies and overlaps with the risk-weighted asset framework, including interactions with the GMS/LCD components and the US Basel III endgame proposal.