Stress Testing Accountability and Transparency Act
- Bill Number
- H.R. 5270
- Origin Chamber
- House
- Congress
- 119th Congress, Session 1
- Policy Area
- Finance and Financial Sector
- Status
- Introduced
- Latest Action
- 2025-11-04: Placed on the Union Calendar, Calendar No. 318.
- Last Updated
- 2026-04-01T15:50:33Z
AI-Generated Summary
Purpose
The Stress Testing Accountability and Transparency Act (H.R. 5270) aims to increase transparency, accountability, and standardization in the Federal Reserve's stress testing processes for large financial institutions. Stress tests are simulations used to assess how banks and similar companies can withstand economic downturns, ensuring they hold enough capital to remain stable. The bill requires the Federal Reserve to formalize methodologies for these tests, publicly share key details in advance, prohibit certain types of tests, and mandate independent reviews.
Key Provisions
- Rulemaking for Stress Capital Buffer Requirements (Section 2):
- Within 90 days of enactment, the Federal Reserve must issue rules detailing the models, assumptions, formulas, and methodologies used in stress tests under the Financial Stability Act of 2010.
- These rules must cover how stress test results from multiple analyses determine a "stress capital buffer" – an extra capital reserve required for large banks to cover risks identified in tests.
- Any major changes to these methodologies must go through a public notice-and-comment process, similar to standard rulemaking.
- The rules must prevent "double-counting" of the same risks in both the stress capital buffer and general risk-based capital requirements.
- Defines "covered company" as large bank holding companies or similar entities subject to specific Federal Reserve regulations; clarifies that the bill does not mandate stress capital buffers for all regulated companies.
- Rulemaking for Stress Testing Scenarios (Section 3):
- Starting the year after enactment, the Federal Reserve must publicly disclose the economic scenarios (e.g., recession models) used in stress tests at least 60 days before conducting them.
- Prohibits the Federal Reserve from imposing "climate-related stress tests" (simulations focused on risks from climate change, like environmental disasters) on nonbank financial companies or bank holding companies using its stress testing authority.
- GAO Report (Section 4):
- Every three years, the Government Accountability Office (GAO, an independent agency that audits federal operations) must study and report to Congress on the Federal Reserve's stress tests from the prior three years.
- The report evaluates how effectively these tests assess the safety of tested financial companies and the overall stability of the U.S. financial system.
Significant Changes to Existing Law
- Introduces mandatory rulemaking for stress test methodologies and stress capital buffer calculations, which were previously determined more flexibly by the Federal Reserve without formal rules.
- Requires advance public disclosure of stress test scenarios, shifting from current practices where details are often released closer to or during the testing period.
- Explicitly bans climate-related stress tests under existing authority, a new limitation not previously codified, potentially overriding any informal Federal Reserve explorations of such risks.
- Adds periodic GAO oversight, providing Congress with regular, independent evaluations that did not exist before.
Potential Impacts
- On Government Agencies: The Federal Reserve faces increased administrative burdens from rulemaking, public disclosures, and restrictions on test types, potentially slowing decision-making but enhancing legitimacy. The GAO gains a recurring audit role, promoting accountability.
- On Citizens: Indirectly benefits the public by strengthening financial system stability, reducing the risk of bank failures that could lead to economic crises (as seen in 2008). Greater transparency may build public trust in banking regulations.
- On International Relations: Minimal direct impact, though standardized U.S. stress testing could influence global banking standards, as many international banks operate in the U.S. and align with Federal Reserve rules.
Main Stakeholders Affected
- Federal Reserve Board: Primary regulator responsible for implementing rules, disclosures, and prohibitions; must adjust internal processes.
- Covered Companies: Large bank holding companies and nonbank financial firms (e.g., major banks like JPMorgan Chase) subject to stress tests; they gain predictability in capital requirements but face bans on climate-specific scrutiny.
- Congress and GAO: Congress receives enhanced oversight tools via reports; GAO conducts studies, influencing future policy.
- Financial Industry and Investors: Banks may experience more stable capital planning; investors benefit from clearer risk assessments.
- Broader Public and Economy: Taxpayers and consumers indirectly affected through reduced systemic risk in the financial sector.
Notable Legal, Constitutional, or Political Implications
- Legal: Reinforces the Administrative Procedure Act's notice-and-comment requirements for agency changes, potentially limiting Federal Reserve discretion and inviting legal challenges if rules are seen as arbitrary. The climate test prohibition could face lawsuits from environmental groups arguing it undermines financial stability mandates.
- Constitutional: Aligns with Congress's authority under Article I to oversee executive agencies like the Federal Reserve, promoting checks and balances without altering its independence.
- Political: Highlights debates on regulatory transparency versus innovation; the climate ban may polarize views, with supporters seeing it as avoiding unproven risks and critics viewing it as downplaying environmental threats to finance. Overall, it promotes bipartisan goals of financial accountability post-2008 reforms.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Cosponsors (2)
Rep. Barr, Andy [R-KY-6], Rep. Sessions, Pete [R-TX-17]
Recent Actions
- 2025-11-04: Placed on the Union Calendar, Calendar No. 318.
- 2025-11-04: Reported (Amended) by the Committee on Financial Services. H. Rept. 119-366.
- 2025-11-04: Reported (Amended) by the Committee on Financial Services. H. Rept. 119-366.
- 2025-09-16: Ordered to be Reported (Amended) by the Yeas and Nays: 28 - 24.
- 2025-09-16: Committee Consideration and Mark-up Session Held
- 2025-09-10: Referred to the House Committee on Financial Services.
- 2025-09-10: Introduced in House
- 2025-09-10: Introduced in House
Bill Versions
- Stress Testing Accountability and Transparency Act — issued 2025-09-10 — PDF (3 pages)
- Stress Testing Accountability and Transparency Act — issued 2025-11-04 — PDF (8 pages)