Federal Reserve Proposes “Stress Capital Buffer” and Scales Back eSLR

On April 10, the Federal Reserve proposed a significant integration of its stress testing regime with its ongoing supervisory capital requirements, by introducing a new “stress capital buffer” and a new Tier 1 leverage buffer requirement for the 39 firms subject to the Federal Reserve’s annual CCAR supervisory stress tests.

The next day, the OCC joined the Federal Reserve in proposing to scale back the buffers related to the “enhanced” supplementary leverage ratio applicable to the 8 U.S. GSIBs and their subsidiary national and state member banks. The Federal Reserve touts the stress capital buffer and related capital and stress testing changes as both “simplifying” and reflective of feedback it received as part of its review of the stress test regime.

However, there are several elements of the proposal that would add complexity and uncertainty to the process.