The American Bankers Association today joined three financial sector associations in urging the Federal Reserve for a more flexible compliance deadline for proposed changes in the stress capital buffer, or SCB, requirement for large banks.
The Fed in April proposed to average stress test results over two consecutive years to reduce the year-over-year changes in the capital requirements that result from the tests. It would also delay the annual effective date of the SCB requirement from Oct. 1 to Jan. 1 of the following year. Finally, it would make targeted changes to streamline the Fed’s stress test-related data collection.
However, in their letter, the associations noted the public comment period for the proposal ends only one week before the Fed must notify banks of their preliminary SCB requirement, immediately after which banks normally would announce their expected stress capital buffers and capital distribution plans. Since at that time there will remain many questions about when the SCB changes would go into effect, if adopted, they asked that the Fed clarify the next SCB calculation. Specifically, they urged the Fed to publicly announce that firms will be permitted to operate under the existing SCB framework through Sept. 30, 2026, regardless of whether it adopts revised SCB mechanics in a final rule with an effective date in that window.
“This approach would provide the (Fed) with flexibility to adopt the proposal as a final rule in an orderly manner at a future date while providing firms and investors with confidence that, at a minimum, the existing SCB methodology will remain an available methodology through Sept. 30, 2026,” the associations said.
