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Stress Test

A regulatory exercise conducted by the Federal Reserve to assess whether large banks have enough capital (money) to withstand severe hypothetical economic downturns, such as a major recession or market crash, without collapsing.

Federal Reserve System (the Board)

The central bank of the United States, responsible for managing the nation's money supply, supervising and regulating banks, and maintaining the stability of the financial system.

Stress Capital Buffer Requirement

An additional amount of capital (money) a bank must hold above its minimum requirements, determined by how much it is projected to lose in a severe stress test scenario. It acts as a cushion to absorb losses.

Covered Company

In this bill, it refers to specific large bank holding companies and other financial firms that are subject to the Federal Reserve's stress testing regulations.

Notice and Comment Rulemaking

A formal public process where a government agency proposes a new rule or regulation, then solicits and considers feedback (comments) from the public and interested parties before finalizing the rule.

Scenario

A hypothetical future economic situation, such as a severe global recession, a sharp increase in unemployment, or a rapid decline in asset prices, used in stress tests to simulate adverse conditions for financial institutions.