BPInsights: July 3, 2026

Analysis: The 2026 Stress Test Results

The Federal Reserve released the results of the 2026 stress tests, which evaluate large banks' resilience to severe economic shocks. The test found that banks would maintain strong capital buffers amid a severe hypothetical recession and market turmoil.

• The aggregate peak-to-trough reduction in bank capital was modestly smaller than the decrease projected last year.
• This improvement primarily reflects higher projected net interest income from a steeper yield curve in the scenario, partly offset by lower unrealized gains on available-for-sale securities and higher projected loss rates on wholesale loans.
• This year's results will not affect banks' capital requirements because the Fed is undergoing a transition to a new framework, incorporating public comment on its proposed revisions. The Fed is expected to finalize changes in time for the 2027 stress test cycle.

Read the full analysis here.

Five Key Things

1. The 2026 GSIB Surcharge Proposal: Halfway Back to the Future?

The Federal Reserve recently proposed changes to its U.S.-specific method for establishing risk-based capital surcharges for the largest globally active banks. This method - known as "method 2" - is one input for the GSIB surcharge, a capital charge applied to Global Systemically Important Banks. The Fed recently proposed to update the fixed parameters underpinning method 2, to adjust them for economic growth over time; as the economy has grown, GSIB surcharges have grown accordingly, resulting in unnecessarily higher capital charges without an increase in banks' systemic importance. While the proposal would partially mitigate this problem, it stops short of a full correction.

Background: U.S. bank regulators apply capital charges to the largest globally active banks using two methods: method 1, established by the international Basel Committee on Banking Supervision, and method 2, a U.S.-specific method that deviates from global standards by its use of fixed denominators. Over time, U.S. GSIB surcharges have risen, reflecting national economic growth rather than increased bank risk. The Fed has proposed to remedy this issue by:

• Making a one-time 20 percent update to the fixed systemic risk indicator coefficients
• Making annual future adjustments for nominal economic growth.

But the proposed changes fail to resolve the problem fully. The one-time 20 percent adjustment for economic growth falls significantly short of the 91 percent growth in nominal economic growth since the coefficients were calibrated.

Bottom Line: A new note by the Bank Policy Institute and Financial Services Forum shows that fully accounting for economic growth since the GSIB framework was originally calibrated would reduce capital surcharges, although the resulting levels would remain above international standards.

2. Op-Ed: The Discount Window Needs Repair

The discount window offers a crucial liquidity safety valve that could keep the banking system stable as it adjusts to a smaller Fed balance sheet - but stigma stands in the way, wrote BPI Chief Economist Bill Nelson and former Federal Reserve Governor Betsy Duke in a recent op-ed in 535. The solution to stigma is for the Fed to make discount window borrowing commonplace, so it does not signal distress, Nelson and Duke wrote. They express support for recent legislation, the Discount Window Preparedness Act co-sponsored by Sens. Mark Warner (D-Va.) and John Kennedy (R-La.), which would push regulators to recognize discount window borrowing capacity and readiness as important elements of prudent liquidity management. "Congress created the discount window to stop bank runs," Duke and Nelson wrote. "Repairing it will make the financial system safer, help deflate the Fed's balance sheet, and allow banks to lend to Main Street."

3. The State of Scams: Devastating Costs, Need for Government Action

Scams are devastating Americans financially and personally, a newly released study from Gallup and the Stop Scams Alliance shows.

• Scams cost American adults an estimated $68 billion in 2025.
• Nearly half of individuals (46 percent) said their household experienced at least a moderate financial hardship from being scammed, including 21 percent who said it was a severe hardship. Lower-income households were most likely to be meaningfully affected.
• A large majority (82 percent) of adults say the government is doing too little to prevent scams.
• The Way In: The most common entry points for scams were online purchases, phone calls and social media, suggesting the need for more proactive safeguards by social media and telecom networks.
• Deception Takes Many Forms: Participants reported various pretexts for scams, such as bank impersonation, fraudulent websites, fake marketplace listings and scam job ads.
• Banks' Role in Responding: Banks play a critical role in responding to scams and helping customers - most victims report scams to their bank, not federal agencies or law enforcement, the study said.

4. Supreme Court Rules that Cook Can Stay on Fed Board

A Supreme Court ruling on Monday held that Federal Reserve Governor Lisa Cook can remain in her job after President Donald Trump had attempted to fire her. Cook had challenged the President's action in court. Chief Justice John Roberts, writing for the five-justice majority, said that the Trump Administration's interpretation "would in effect transform the Federal Reserve's for-cause protection into at-will employment-an interpretive leap out of step with the statute Congress enacted and our Nation's tradition of central banking protected from political interference." Roberts was joined by Justices Sonia Sotomayor, Elena Kagan, Brett Kavanaugh, and Ketanji Brown Jackson in the majority opinion. Justice Clarence Thomas argued in his dissenting opinion that "[a]lthough the Court expresses concern that the President removed a Board member for 'the first time in the Federal Reserve's 111-year history,' it expresses no such concern that it today upholds an injunction against the President's removal of an executive officer for the first time in the Constitution's 237-year history." At the heart of the case was the president's power over the seven-member board of the central bank, which is an independent government agency that is not funded by Congress through the normal appropriations process.

5. The Crypto Ledger

Here's the latest in crypto.

• NYT: President Earned $1.4B from Family Crypto Businesses. President Donald Trump earned about $1.4 billion from his family's cryptocurrency businesses, according to a financial disclosure filing cited by the New York Times this week. During 2025, a UAE-linked investment firm bought nearly half of the Trump family's crypto company World Liberty Financial, a major transaction over the last year. President Trump also earned revenue from sales of his memecoin and World Liberty's sale of its own digital tokens, the Times reported.
• White House Meets with Law Enforcement on Crypto Bill. Administration officials held a meeting with law enforcement groups on Monday, aiming to resolve the groups' objections to language in the Clarity Act that would hamper investigations of illicit finance, according to media reports. The provision in question, the Blockchain Regulatory Certainty Act, has also garnered concerns from Catholic leaders, who say it could enable the funding of human trafficking. The language would exempt developers of decentralized crypto software from criminal prosecution.
• UK Reduces Proposed Stablecoin Capital Requirements. The UK Financial Conduct Authority proposed to reduce a capital requirement for stablecoins as it unveils a new framework for crypto assets. The new proposal would require stablecoin issuers to hold funds equal to 1 percent of the total value of their stablecoins, down from a previous proposal of 2 percent.
• SEC Wins Crypto Pig Butchering Suit. The SEC won its first lawsuit targeting a crypto pig butchering scam. A federal judge in Brooklyn awarded about $5.4 million in a default judgment against NanoBit Limited and its affiliates, which are accused of soliciting investors by posing as financial professionals and building relationships with victims on social media.

In Case You Missed It

Traversing the Pond

Here's the latest in international banking policy.

• European Court of Justice: Third-Country Sanction Alone Does Not Justify Refusing Bank Account. The European Court of Justice in June ruled that an EU bank may not refuse to open a bank account solely because the consumer appears on a third-country sanctions list, including the U.S. Office of Foreign Assets Control. A third-country sanctions listing may be taken into account as a factor in a bank's individual anti-money laundering assessment, but a bank may not rely on this factor alone to justify refusing an account, the court ruled.
• EU Banks, Trading Firms Urge Regulators Not to Intervene in Equity Markets. Large European banks and trading firms urged regulators not to intervene in equity markets, citing a lack of evidence that a decline in trading on traditional exchanges has harmed price-setting. Tightening rules on off-exchange trading could damage liquidity and harm investors, argued the Association for Financial Markets in Europe, which represents large banks as well as nonbank trading firms.
• ECB Seeks to Streamline Supervisory Guidance. Late last week, the European Central Bank announced an effort to streamline supervisory guidance as part of a "comprehensive reform agenda for European banking supervision." All supervisory guides, reports, letters and methodologies will be assessed for "relevance, effectiveness and clarity," while the ECB will discontinue several publications and revise others. The central bank will also emphasize the non-binding nature of supervisory guidance documents and ensure consistency across publications, the announcement said. "Our objective is simple: to ensure that our supervisory guidance remains clear, ⁠consistent and fit for purpose in an increasingly complex risk environment," ECB board member Frank Elderson said in a blog post.

Member News

Wells Fargo Pledges $1 Million Donation Toward Skilled Trades in Pennsylvania

Wells Fargo recently announced a $1 million donation to support skilled trades, training and workforce development in Pennsylvania through its ongoing partnership with the mikeroweWORKS Foundation. The investment builds on more than $10 million Wells Fargo has provided over the past two years in partnership with the foundation to advance skilled trades initiatives nationwide.

Upcoming Events

• 7/14/2026: House Financial Services Committee Hearing: Federal Reserve Semi-Annual Monetary Policy Report
• 7/15/2026: HFSC Hearing: Semi-Annual Report of the Bureau of Consumer Financial Protection
• 7/17/2026: HFSC Subcommittee on Digital Assets, Financial Technology and Artificial Intelligence Field Hearing: Building the Future of Finance: How the CLARITY Act Unlocks Innovation
• 7/21/2026: HFSC Subcommittee on National Security, Illicit Finance and International Financial Institutions Hearing: Oversight of the Financial Crimes Enforcement Network
• 7/21/2026: HFSC Subcommittee on Housing and Insurance Hearing: Oversight of the Federal Home Loan Bank System