Trade Groups Press Fed to Clarify Stress Test Framework Requirements for 2025 Cycle

The Financial Services Forum, American Bankers Association, Bank Policy Institute and SIFMA (collectively, the "Associations") urged the Federal Reserve Board ("FRB") to take steps to "clarify the operation of the 2025 stress test cycle and related stress capital buffer ("SCB") requirements to avoid unnecessary uncertainty."   

The Associations asked the FRB to publicly confirm that large banking organizations "will be permitted to operate under the existing SCB framework through September 30, 2026," regardless of whether the FRB adopts proposed amendments to the SCB calculation methodology during that period. (See related coverage.)

The Associations explained that the FRB's proposed changes to the stress testing regime effective for 2025 "include averaging stress capital buffer requirements" and change the effective date of the requirements with comments due on June 23. The Associations argued that "since a final rule will not be in place by the time that stress test results are released on June 30, firms will be unable to accurately communicate their tentative stress capital buffers or capital actions." 

The Associations recommended allowing 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." They argued that such an action would (i) enable firms to plan and disclose capital distributions in late June 2025; (ii) give the FRB the flexibility to finalize the proposed rule on its own timeline without triggering immediate compliance concerns; (iii) allow firms to elect to use revised SCB mechanics if and when finalized, while preserving the current framework as a default option; and (iv) avoid near-term disclosure problems and capital planning confusion.