Fed opens stress tests to public comment, citing need for transparency, public accountability

Enhancing the transparency and public accountability of annual stress tests conducted by the Federal Reserve will be the subject of public comment, the agency said Friday, with that input due by Dec. 1

The agency is seeking specific comment on: the stress test models; changes to the framework that guides the design of the hypothetical scenarios; and the hypothetical scenarios for the upcoming 2026 stress test.

Other elements are also subject to comment, the Fed said. Those include an enhanced disclosure process for future stress test cycles, adjustments to the annual timeline to accommodate a comment period for scenarios, and enhancements to reporting forms to reduce burden and improve risk capture.

“In an effort to avoid litigation, the Board committed to make significant improvements in the transparency of the stress tests. These proposals take a necessary step toward fulfilling that commitment, and would promote due process,” said Fed Board Vice Chair for Supervision Michelle W. Bowman, in a statement. “Regulated firms should be subject to clearly articulated and transparent rules. Capital requirements should not be set in a way that is shielded from meaningful public scrutiny. As vice chair for supervision, I am committed to providing transparency and accountability for both the Board and our supervised firms. This is essential for maintaining the value of our stress testing program, and for supervision and regulation more broadly.”

Federal Reserve Board requests comment on proposals to enhance the transparency and public accountability of its annual stress test