Bank Stress Testing Guidelines: DFAST, CCAR, and Capital Buffers

Bank stress testing guidelines are the federal rules that require the largest U.S. banks to prove, once a year, that they could survive a severe recession without a government rescue. The Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation jointly design the exercise and enforce its results. For the 2026 cycle, 32 banks are being tested against a hypothetical downturn featuring 10% unemployment, a 30% drop in house prices, and a 4.6% decline in real GDP. How each bank performs sets its firm-specific capital requirement and determines whether it can pay dividends or buy back stock.¹

Which Banks Are Covered

The Dodd-Frank Act originally required stress testing for any bank with more than $10 billion in assets. The Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 narrowed that scope sharply, raising the threshold for mandatory company-run stress tests from $10 billion to $250 billion.² Banks below that line no longer run their own tests or submit results to the Fed.

Above the threshold, the Fed uses a four-tier “tailoring” framework that matches oversight intensity to size and risk:³

Category I covers U.S. global systemically important banks (G-SIBs), which face the most rigorous annual supervisory and company-run tests plus global market shock and counterparty default components.
Category II covers firms with $700 billion or more in total assets, or $75 billion or more in cross-jurisdictional activity. They face annual supervisory and company-run tests.
Category III covers firms with $250 billion or more in total assets, or $75 billion or more in nonbank assets, weighted short-term wholesale funding, or off-balance-sheet exposure. They face supervisory and company-run tests every two years.
Category IV covers other firms with $100 billion to $250 billion in total assets. They face supervisory stress tests every two years and are not required to run their own company-run tests.⁴

The 2026 supervisory test covers 32 banks, from JPMorgan Chase and Bank of America down to Synchrony Financial and Keycorp.¹

DFAST and CCAR

Two acronyms dominate the framework. DFAST, or Dodd-Frank Act Stress Testing, is the quantitative exercise. The Fed runs its own models against each bank’s balance sheet to project losses, revenue, and capital ratios under hypothetical scenarios, and firms subject to company-run testing perform a parallel analysis using the same scenarios. DFAST results are published each June.⁵

CCAR, the Comprehensive Capital Analysis and Review, is the broader capital planning framework that sits on top of DFAST. It uses the DFAST numbers as its quantitative backbone and also evaluates a bank’s internal capital planning processes, governance, and risk management.⁶ For most banks today, the binding constraint out of the combined process is the Stress Capital Buffer, a quantitative number derived directly from stress test results.

The Scenarios Banks Are Tested Against

The Fed writes the scenarios every bank must model. Under the tailoring framework, the old middle “adverse” scenario was eliminated, leaving two.⁴

Baseline

The baseline reflects expected economic conditions. It is not a pass/fail test on its own; it is the reference point against which the projected capital hit from the stress scenario is measured.

Severely Adverse

This scenario drives the results. It simulates a severe global recession with steep job losses, collapsing asset prices, and market turmoil. For the 2026 cycle, the severely adverse scenario features real GDP declining 4.6% from its starting point, unemployment peaking at 10%, nominal house prices falling 30%, and commercial real estate prices dropping 39%.⁷ The Fed recalibrates the numbers each year, and for 2026 it pushed several variables toward the upper end of their severity ranges.⁸

Trading and Counterparty Add-Ons

Banks with large trading operations face two extra layers on top of the macroeconomic scenarios. The global market shock component applies hypothetical shocks to a broad set of financial risk factors, with the resulting trading losses booked in the first quarter of the test. Firms with substantial trading or custodial activity must also model the unexpected default of their single largest counterparty and estimate the cascade of losses.¹

The Stress Capital Buffer

The most important output of the test is the Stress Capital Buffer (SCB), a firm-specific capital requirement calculated from each bank’s projected performance under the severely adverse scenario.

The formula: take the bank’s Common Equity Tier 1 (CET1) ratio at the start of the test horizon, subtract the lowest projected CET1 ratio at any point during the nine-quarter stress period, then add four quarters of planned common stock dividends. If the result is below 2.5%, the SCB is set at that 2.5% floor.⁹

A bank’s total CET1 requirement is the sum of the 4.5% regulatory minimum, its individual SCB (at least 2.5%), and, for G-SIBs, a surcharge on top. Falling below that combined threshold triggers automatic restrictions on dividends, share buybacks, and discretionary bonus payments, and the restrictions tighten progressively as capital falls further below the line.

For context, the 2025 stress test projected the aggregate CET1 ratio across all 31 tested banks would decline from 13.4% to a minimum of 11.6% under the severely adverse scenario before recovering to 12.8%.⁵ Individual banks varied widely around that average.

The G-SIB Surcharge

The eight U.S. global systemically important banks face an added capital surcharge. It is calculated annually using two methods, and the bank must hold whichever produces the higher result. Method 1, based on international standards, produces surcharges ranging from 1.0% to 4.5% of risk-weighted assets. Method 2 incorporates reliance on short-term wholesale funding and generally produces higher surcharges, reaching 5.5% or more for the largest and most complex firms.¹⁰

Stacked together, the requirements can be substantial. A G-SIB with a 3.0% surcharge and a 3.5% SCB needs a CET1 ratio of at least 11.0% to avoid distribution restrictions. The supplementary leverage ratio, a non-risk-based backstop requiring the largest banks to hold capital equal to at least 5% of total leverage exposure, adds another constraint on top.¹¹

The Annual Cycle

The test runs on a predictable calendar:¹²

Mid-February: the Fed publishes the hypothetical scenarios.
Early April: firms subject to company-run testing submit their results, based on December 31 balance sheet data.¹³
Late first quarter: the Fed publishes its Stress Test Methodology document.
Late June: the Fed releases individual and aggregate supervisory results.
Third quarter: the Fed publishes each bank’s updated capital requirements, incorporating the new SCB. Those requirements take effect on October 1 and stay in place for a year.

Category IV firms follow a biennial cycle, with supervisory tests in even-numbered years. In odd-numbered years, their SCB is adjusted rather than fully recalculated.⁹

What Happens if a Bank Falls Short

The first consequence is automatic. A bank whose capital drops below its combined CET1 requirement immediately faces limits on dividends, buybacks, and discretionary bonuses, with those limits tightening as the shortfall grows.

If capital deteriorates further, the FDIC’s prompt corrective action framework takes over. Banks are sorted into five categories based on their risk-based capital and leverage ratios, from well capitalized down to critically undercapitalized.¹⁴ A well capitalized bank meets a CET1 ratio of at least 6.5%, a total risk-based capital ratio of at least 10.0%, and a leverage ratio of at least 5.0%. An undercapitalized bank must file a capital restoration plan and faces restrictions on asset growth. A significantly undercapitalized bank can be forced to change management, restrict executive pay, and cut ties with affiliates. A critically undercapitalized bank, defined by tangible equity at or below 2.0% of total assets, must generally be placed into receivership or conservatorship within 90 days.

The stress test is designed to catch problems well before that point. The automatic distribution restrictions function as an early warning that forces a bank to conserve capital long before prompt corrective action would kick in.

What Changed for the 2026 Cycle

Several methodological updates take effect this cycle. The Fed expanded the “guides” it uses to calibrate scenario variables, publishing more of its reasoning behind severity levels for unemployment, house prices, and other inputs. It also published the macroeconomic model that keeps scenario variables internally consistent, and disclosed the model behind the global market shock component for the first time.⁸

On the capital side, a final rule effective April 2026 modifies the enhanced supplementary leverage ratio for the largest banks’ depository subsidiaries, capping the enhanced requirement at one percentage point above the baseline and bringing the maximum for those subsidiaries to 4%.¹¹ The Fed also refined the counterparty default component, exempting certain multilateral development banks and supranational entities.

Scenario descriptions, methodology documents, and individual bank results are posted on the Federal Reserve’s Dodd-Frank Act Stress Test Publications page.¹⁵

1
Federal Reserve. 2026 Stress Test Scenarios
2
Federal Deposit Insurance Corporation. Final Rule Amending the FDIC’s Stress Test Regulation
3
Federal Reserve. Requirements for Domestic and Foreign Banking Organizations
4
Federal Reserve. Draft Final Rules to Tailor Prudential Standards to Large Banking Organizations
5
Federal Reserve. Dodd-Frank Act Stress Test 2025 – Supervisory Stress Test Results
6
Federal Reserve. Comprehensive Capital Analysis and Review and Dodd-Frank Act Stress Tests – Questions and Answers
7
NCUA. 2026 Stress Testing Scenario Summary
8
Federal Reserve. Proposed 2026 Stress Test Scenarios
9
eCFR. 12 CFR 225.8 – Capital Planning and Stress Capital Buffer Requirement
10
eCFR. 12 CFR 217.403 – GSIB Surcharge
11
Federal Reserve. Agencies Issue Final Rule to Modify Certain Regulatory Capital Standards
12
Federal Reserve. 2025 Stress Test Scenarios
13
eCFR. 12 CFR Part 252 Subpart F – Company-Run Stress Test Requirements
14
Federal Deposit Insurance Corporation. Prompt Corrective Action
15
Federal Reserve. Dodd-Frank Act Stress Test Publications