The Federal Reserve promotes a safe, sound, and efficient banking and financial system that supports the growth and stability of the U.S. economy through its supervision of bank holding companies (BHCs), U.S. intermediate holding company (IHC) subsidiaries of foreign banking organizations, savings and loan holding companies, and state member banks.
The Federal Reserve has established frameworks and programs for the supervision of its largest and most complex financial institutions to achieve its supervisory objectives, incorporating lessons learned from the 2007–09 financial crisis and in the period since then. As part of these supervisory frameworks and programs, the Federal Reserve assesses whether BHCs with $100 billion or more in total consolidated assets and U.S. IHCs (together, firms) are sufficiently capitalized to absorb losses during stressful conditions while meeting obligations to creditors and counterparties and continuing to be able to lend to households and businesses. The Board first adopted rules implementing these frameworks and programs in October 2012 and most recently modified these rules in January 2021.1
Each year, the Federal Reserve publicly discloses the results of its supervisory stress test. These disclosures include revenues, expenses, losses, pre-tax net income, and capital ratios under adverse economic and financial conditions projected by the Federal Reserve. The Federal Reserve projects these components using a set of models developed or selected by the Federal Reserve that take as inputs the Board's scenarios and firm-provided data on firms' financial conditions and risk characteristics.
1. In January 2021, the Board finalized a rule to update capital planning requirements for large banks to be consistent with the tailoring rule (86 Fed. Reg. 7927 (February 3, 2021)). The rule aligns the frequency of the calculation of the stress capital buffer requirement with the frequency of the supervisory stress test. The rule also allows a banking organization subject to Category IV standards to elect to participate in the supervisory stress test in a year in which the banking organization would not otherwise be subject to the supervisory stress test, and receive an updated stress capital buffer requirement in that year. Return to text