US Federal Reserve's Michelle Bowman says changes to bank stress test coming soon

The Federal Reserve will soon vote on an updated version of its stress test framework for major US banks, according to Michelle Bowman, Vice Chair for Supervision. The changes aim to make the testing process more transparent and predictable, responding to long-standing concerns from the banking industry. Bowmen stated that the revised framework would include more detailed information about the models and scenarios used in the tests, as well as a method to average stress-test results over two recent exams to reduce volatility in capital requirements.

The Fed also intends to use stress testing to privately notify supervisors of potential weaknesses at individual banks. Bowman aims to complete the overhaul, along with two other major capital rule changes, by the end of the year.