Federal Reserve Board Finalizes Hypothetical Scenarios for Its Annual Stress Test and Votes to Maintain the Current Stress Test-Related Capital Requirements Until Public Feedback Can Be Considered

Why It Matters

Maintaining current capital buffers preserves banking stability while the Fed refines its models, ensuring resilience against extreme economic shocks. The scenario’s harsh assumptions signal heightened supervisory scrutiny for large, market‑active banks.

Key Takeaways

• 32 banks face severe recession scenario
• Unemployment peaks at 10% in stress test
• House prices fall 30%, commercial real estate 39%
• Counterparty default and global market shock added
• Capital buffers stay unchanged through 2027

Pulse Analysis

The Federal Reserve’s annual supervisory stress test remains a cornerstone of U.S. financial stability policy. By finalizing the 2026 scenarios, the Board signals continuity in its risk‑assessment framework, allowing banks to prepare for a worst‑case recession that stretches two years ahead. The test’s core assumptions—double‑digit unemployment, sharp declines in real‑estate values, and widening corporate‑bond spreads—mirror stressors that have historically strained balance sheets, offering regulators a calibrated lens to gauge capital adequacy across the banking sector.

This year’s scenarios introduce two notable refinements. First, banks with sizable trading or custodial operations must model a counterparty‑default shock, reflecting the systemic risk posed by the sudden failure of a major counterpart. Second, the global‑market‑shock component has been tweaked for greater consistency, targeting exposures that are vulnerable to abrupt market turbulence. These additions push large, market‑active institutions—such as JPMorgan, Goldman Sachs, and Wells Fargo—to stress‑test not only credit risk but also liquidity and market‑risk dynamics, sharpening risk‑management practices and potentially influencing trading strategies.

Policy‑wise, the Board’s decision to keep stress‑capital‑buffer requirements static until 2027 underscores a cautious approach. By awaiting public commentary, the Fed aims to refine its supervisory models, enhancing transparency and fairness. Market participants are likely to view the delay as a stabilizing signal, reducing immediate capital‑raising pressures while encouraging banks to focus on operational resilience. Looking ahead, the feedback loop may shape the next round of capital standards, aligning regulatory expectations with evolving economic realities and stakeholder insights.

Federal Reserve Board finalizes hypothetical scenarios for its annual stress test and votes to maintain the current stress test-related capital requirements until public feedback can be considered

Press Release · February 04, 2026

The Federal Reserve Board on Wednesday finalized the hypothetical scenarios for its annual stress test, which helps ensure that large banks can continue to lend to households and businesses even in a severe recession. The final scenarios are substantially similar to the scenarios proposed in October. Additionally, the Board voted to maintain the current stress capital buffer requirements until 2027, when new requirements can be calculated based on models that take public feedback into consideration.

“Waiting to calculate new stress capital buffer requirements until we receive public feedback will give us the opportunity to correct any deficiencies in our supervisory models based on that feedback,” said Vice Chair for Supervision Michelle W. Bowman. “This should further improve the transparency, effectiveness, and fairness of our models and improve our accountability to the public.”

The Board's annual stress test evaluates the resilience of large banks by estimating losses, net revenue, and capital levels under hypothetical recession scenarios that extend two years into the future. This year, 32 banks will be tested against a severe global recession with heightened stress in both commercial and residential real‑estate markets, as well as in corporate‑debt markets. The scenarios are not forecasts and should not be interpreted as predictions of future economic conditions.

In the 2026 stress‑test scenario, the U.S. unemployment rate rises nearly 5.5 percentage points, to a peak of 10 percent. The unemployment increase is accompanied by severe market volatility, a widening of corporate‑bond spreads, and a collapse in asset prices, including about a 30 percent decline in house prices and a 39 percent decline in commercial‑real‑estate prices.

Large banks with substantial trading or custodial operations are also required to incorporate a counterparty‑default scenario component to estimate potential losses from the unexpected default of the firm’s largest counterparty amid an acute market shock. In addition, banks with large trading operations will be tested against a global‑market‑shock component that primarily stresses their trading and related positions. The final scenarios include two revisions to the global‑market‑shock component to improve consistency across shocks applied to similar exposures and enhance plausibility.

The table below shows the components of the annual stress test that apply to each bank, based on data as of the third quarter of 2025. The brief methodology document describes the Board’s intention to generally use the same models as the 2025 stress test with limited model adjustments.

| Bank | Subject to global market shock | Subject to counterparty default |

|------|--------------------------------|---------------------------------|

| Ally Financial Inc. | | |

| American Express Company | | |

| Bank of America Corporation | x | x |

| The Bank of New York Mellon Corporation | | x |

| Barclays US LLC | x | x |

| BMO Financial Corp. | | |

| Capital One Financial Corporation | | |

| The Charles Schwab Corporation | | |

| Citigroup Inc. | x | x |

| Citizens Financial Group, Inc. | | |

| DB USA Corporation | x | x |

| Fifth Third Bancorp | | |

| First Citizens Bancshares, Inc. | | |

| The Goldman Sachs Group, Inc. | x | x |

| HSBC North America Holdings Inc. | | |

| Huntington Bancshares Incorporated | | |

| JPMorgan Chase & Co. | x | x |

| KeyCorp | | |

| M&T Bank Corporation | | |

| Morgan Stanley | x | x |

| Northern Trust Corporation | | |

| The PNC Financial Services Group, Inc. | | |

| RBC US Group Holdings LLC | | |

| Regions Financial Corporation | | |

| Santander Holdings USA, Inc. | | |

| State Street Corporation | | x |

| Synchrony Financial | | |

| TD Group US Holdings LLC | | |

| Truist Financial Corporation | | |

| UBS Americas Holding LLC | | |

| U.S. Bancorp | | |

| Wells Fargo & Company | x | x |

The information listed in this table is based on third‑quarter 2025 data.

Media contact:

Email: [email protected]

Phone: 202‑452‑2955

Related documents:

• Federal Register notice: Final Scenarios for the Board’s 2026 Supervisory Stress Test (PDF)

• Board Memo (PDF)

• 2026 Final Supervisory Stress Test Scenarios (PDF)

• 2026 Scenario Review of Comments (PDF)

• 2026 Stress Test Methodology (PDF)

• Statement by Governor Barr

• Statement by Governor Cook

Last Update: February 04, 2026