Statement on Proposals to Enhance the Transparency and Public Accountability Of the Board’s Stress Testing Framework By Governor Christopher J. Waller

I support these proposals. The proposed changes will improve accountability, build confidence in the fairness of the process, and foster feedback and ongoing improvements to our models and scenarios.

Stress testing is an essential element of our regulatory framework for large firms that assesses whether such firms have sufficient capital to withstand severe economic conditions. The results inform large firm capital requirements by helping to size the stress capital buffer requirement. It is critical that we provide sufficient transparency into how these important risk-sensitive requirements are calculated.

Last year, the Board announced it would be improving the transparency of the stress test by disclosing and seeking comment on the models and scenarios used in the test.¹ Today, thanks to the tireless efforts of Vice Chair for Supervision Bowman, this promise is being fulfilled. These proposals will maintain the risk sensitivity of our capital framework and the effectiveness of the stress test.

Regulation of large banks affects their business and their ability to provide credit that supports the economy. As noted by staff, greater transparency would instill confidence in the fairness of the stress test and would create an important pathway for public feedback, which will allow the Board to improve its models and scenarios.

For these reasons, I support the proposals to enhance transparency of our stress test and release the 2026 scenarios for public comment. I look forward to reviewing comments.

1. Press Release, "Due to evolving legal landscape & changes in the framework of administrative law, Federal Reserve Board will soon seek public comment on significant changes to improve transparency of bank stress tests & reduce volatility of resulting capital requirements," December 23, 2024. Return to text