Stress Testing Accountability and Transparency Act

This bill makes the Federal Reserve spell out, in formal rules, how it designs bank stress tests and the “stress capital buffer” that helps decide how much extra capital big banks must hold in tough times. It also says the Fed can’t count the same risk twice when setting those capital levels. Before each year’s stress test, the Fed must publish the exact economic “what if” scenarios it will use, at least 30 days in advance.

It also blocks the Fed from using its stress test powers to run climate-related stress tests on nonbank financial companies. Every three years, the Government Accountability Office must review how well these stress tests are working for nonbank firms and the overall financial system.

• Who is affected: The Federal Reserve, bank holding companies, and nonbank financial companies.
• What changes: The Fed must set and change stress test methods by rule; avoid double-counting risks; publish test scenarios 30 days before testing; no climate-related stress tests for nonbanks; regular GAO reviews.
• When: Within 90 days of enactment for the stress capital buffer rule; starting the first calendar year after enactment for publishing stress scenarios; GAO reports every three years.