The Federal Reserve Board finalized hypothetical scenarios for its 2026 annual stress test, maintaining current capital buffer requirements until 2027 to incorporate public feedback. The scenarios, largely unchanged from October proposals, simulate a severe global recession with 5.5 percentage point rise in U.S. unemployment to 10%, alongside market volatility, corporate bond spread widening, and asset price declines. Residential home prices would drop 30%, while commercial real estate prices fall 39%. Banks with trading operations face counterparty default and global market shock components, with 32 institutions undergoing testing. The Board emphasized transparency and accountability in refining supervisory models. Final scenarios include revised global market shock components for consistency. Banks subject to specific stress tests are listed in the accompanying table.
https://www.federalreserve.gov/newsevents/pressreleases/bcreg20260204a.htm
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