Fed proposes averaging large bank stress test results to reduce volatility

The Federal Reserve has proposed changes to annual stress tests for large banks, suggesting to average results over two years instead of one, providing banks more time to adjust their capital plans.

By extending the timeframe for compliance, the Fed aims to improve transparency and lessen volatility in capital planning, although no significant changes to capital requirements are proposed.

Reactions to these changes are mixed. While some support greater transparency, others warn that public commentary could undermine the rigor of the tests, potentially allowing banks to influence results.