---
title: "Stress Capital Buffer: definition, formula, and thresholds"
description: "The Stress Capital Buffer (SCB) is a bank-specific CET1 buffer derived from the Federal Reserve's annual stress test. It replaces the static 2.5% capital conservation buffer for the largest banks and floors at 2.5%."
canonical_url: https://www.bankregreports.com/glossary/stress-capital-buffer/
source: BankRegReports
category: "Capital"
units: "%"
schedule: "Annual CCAR/DFAST publication (June)"
---

# Stress Capital Buffer

> The Stress Capital Buffer (SCB) is a bank-specific CET1 buffer derived from the Federal Reserve's annual stress test. It replaces the static 2.5% capital conservation buffer for the largest banks and floors at 2.5%.

## Formula

```
SCB = max(2.5%, projected peak-to-trough CET1 decline in severely adverse scenario + planned dividends as % of RWA)
```

Each year the Fed runs the bank's balance sheet through a severely adverse macroeconomic scenario. The peak-to-trough CET1 decline, plus four quarters of planned dividend payouts as a share of RWA, sets the bank's SCB. The floor is 2.5%.

## Why it matters

The SCB lets capital requirements respond to a bank's specific risk profile. A bank with concentrated credit exposure that stress-tests poorly will face a larger buffer; a bank with a diversified, low-volatility book faces the floor. It is the single most consequential output of the annual CCAR exercise.

## How to read it

Typical US large-bank SCBs run 2.5-5.0%. A bank whose SCB jumps from the floor is a meaningful signal. Usually it means stress-test losses came in worse than the bank's own internal models projected. The June SCB publication is one of the most-watched events for large-bank equity investors.

## Thresholds

| Range | Reading | What it means |
|---|---|---|
| 2.5% | Floored | Minimum buffer; strong stress-test result. |
| 2.5–3.5% | Moderate | Typical for diversified universal banks. |
| 3.5–5% | Elevated | Above-average stress losses or high payout assumption. |
| > 5% | High | Sustained or large stress-test capital depletion. |


## Worked example

The SCBs set after the 2025 stress test, which the Federal Reserve kept in place for 2026, include JPMorgan Chase 2.5%, Bank of America 2.5%, Wells Fargo 2.5%, Goldman Sachs 3.4%, Citigroup 3.6% and Morgan Stanley 4.3% (Federal Reserve, Large Bank Capital Requirements, June 2026). The SCB combined with the 4.5% CET1 minimum and G-SIB surcharge sets each bank's binding capital floor.

## Questions

### Who is subject to the Stress Capital Buffer?

Category I-IV bank holding companies (roughly $100B+ in assets). G-SIBs receive the SCB plus their G-SIB surcharge; non-SCB banks use the standard 2.5% capital conservation buffer.

### When does each year's SCB take effect?

Under the current rule, the SCB set after each June stress test takes effect October 1 and stays in place for a year. In February 2026 the Federal Reserve voted to keep the requirements set in 2025 in place until 2027 while it revises its stress test models. A final rule announced September 30, 2026 moves the effective date to January 1, starting with the buffer effective January 1, 2028, and sets each buffer from the average of the two most recent stress tests, starting with the buffer effective January 1, 2029.

### Can a bank reduce its SCB?

Indirectly: by reducing trading and credit concentrations, raising risk modeling quality, or reducing planned dividends. The next year's stress test will reflect the changed risk profile.

## Sources

- [12 CFR §225.8: Federal Reserve capital plan rule](https://www.ecfr.gov/current/title-12/part-225)
- Annual DFAST (Dodd-Frank Act Stress Test) results

## Related metrics

- [Capital Conservation Buffer](https://www.bankregreports.com/glossary/capital-conservation-buffer/): The Capital Conservation Buffer (CCB) is a 2.5% layer of CET1 capital that sits on top of the Basel III minimums. Banks operating inside the buffer face automatic restrictions on dividends, share buybacks, and discretionary bonuses.
- [G-SIB Surcharge](https://www.bankregreports.com/glossary/gsib-surcharge/): The G-SIB Surcharge is an additional CET1 capital requirement applied to Global Systemically Important Banks (G-SIBs). The eight US G-SIBs face surcharges ranging from 1.0% to 4.5% on top of the standard capital framework.
- [Common Equity Tier 1 Capital Ratio](https://www.bankregreports.com/glossary/cet1-ratio/): The CET1 ratio measures a bank's highest-quality capital (common stock and surplus, retained earnings and, for banks that have not opted out, accumulated other comprehensive income, less regulatory deductions) against its risk-weighted assets. It is the most-watched single capital indicator in US bank supervision after the 2013 Basel III reforms.
- [Tier 1 Risk-Based Capital Ratio](https://www.bankregreports.com/glossary/tier1-rbc/): The Tier 1 Risk-Based Capital ratio measures a bank's Tier 1 capital (CET1 plus Additional Tier 1 instruments) against its risk-weighted assets. It is the broader of the two Tier-1 capital measures and is still the headline capital metric for most banking comparisons.

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