The Federal Reserve’s proposed 2026 stress test scenarios have been met with cautious approval from several major financial industry associations, including the Bank Policy Institute (BPI), American Bankers Association, Financial Services Forum, Securities Industry and Financial Markets Association, International Swaps and Derivatives Association, and Institute of International Bankers. In a joint comment letter submitted today, these organizations recognized the Fed's effort to increase transparency by releasing its proposed scenarios for public comment and providing more detailed information about how key variables are calibrated.
For the first time, the Federal Reserve has published its stress test scenarios for public feedback and outlined a more detailed scenario design policy. This includes guides and a macroeconomic model describing variable calibration methods. The associations said these steps are a constructive response to longstanding requests that the Fed make its stress testing process subject to notice-and-comment procedures under the Administrative Procedure Act.
However, concerns remain about how much discretion the Fed will retain in designing these scenarios. The groups argue that while transparency has improved, further clarity is needed regarding how the central bank applies its judgment year-to-year when setting up scenario parameters. According to their letter: “The Enhanced Transparency NPR and the publication of the Proposed 2026 Scenarios for public comment represent an improvement in the overall transparency and accountability of the Federal Reserve’s stress testing processes. However, the proposed framework would grant inordinate discretion to the Federal Reserve, without requiring sufficient explanation for its design choices year-to-year.”
On October 24, 2025, following a legal challenge brought by BPI and others in December 2024 calling for greater openness in stress test modeling, the Fed issued proposals aimed at increasing accountability within this process.
The associations’ comment letter addresses only the specific proposed 2026 scenarios; they plan to respond separately on broader revisions to stress test models and frameworks. The deadline for comments on those proposals has been extended to February 21, 2026.
Industry representatives emphasize that how these tests are constructed affects not just banks but also credit costs across the economy because capital requirements—determined through these tests—impact lending rates available to consumers and businesses. They caution that insufficient explanation of design decisions could result in volatile outcomes from year to year.
The organizations highlight several areas needing further detail:
- The Fed often calibrates certain variables at high levels of severity without explaining this choice.
- The adverse scenario projects simultaneous severe shocks across asset classes but does not appear to account for recent market dynamics or explain deviations from macroeconomic models.
- For banks with significant trading operations subject to Global Market Shock assessments, there is considerable discretion in methodology; more detail is needed on how severities are selected each year.
They urge regulators “to build on its progress by providing more detail on how it will choose points within permitted ranges for key variables,” especially considering current conditions and historical data.
BPI represents universal banks as well as regional and foreign banks operating in America; it produces research on regulatory topics relevant to banking policy. The American Bankers Association represents institutions across all sizes holding $25 trillion in assets nationwide. The Financial Services Forum advocates for eight large U.S.-headquartered financial institutions serving millions of clients nationwide. SIFMA is an industry association representing broker-dealers and asset managers active in both domestic and global markets (see http://www.sifma.org). ISDA works internationally with over one thousand members engaged with derivatives markets (more at www.isda.org). IIB represents U.S.-based operations of international financial institutions from over thirty-five countries.
Contact information was provided for media inquiries related to each organization involved.