struggle to understand and anticipate the results of supervisory stress tests and the accompanying stress capital buffer requirements. the simple solution here seems to be disclosure of more granular information about all of the models used in stress testing. in my view, disclosure of these models — and even subjecting the models to appropriate notice and comment processes and public feedback — would not undermine the goal of the stress tests of having a regulator - created model that is separate and distinct from the internal models used by firms. regulators would still control the contours and content of the models but would have the benefit of public feedback. if we believe in the validity and reasonableness of our model design choices, we should not shy away from public feedback. third, we should adjust the compliance framework for stress capital buffers. firms should not be forced to comply with higher capital requirements after only a few months ’ notice but should have a reasonable time frame for compliance. i would note that a longer compliance “ stress testing policy statement, ” 84 fed. reg. 6664 ( february 28, 2019 ), https : / / www. govinfo. gov / content / pkg / fr - 2019 - 02 - 28 / pdf / 2019 - 03503. pdf. board of governors of the federal reserve system, “ federal reserve board finalizes set of changes that will increase the transparency of its stress testing program for nation's largest and most complex banks, ” news release, february 5, 2019, https : / / www. federalreserve. gov / newsevents / pressreleases / bcreg20190205a. htm. - 14 runway is particularly important in a world in which testing is opaque and volatility continues to be excessive. to the extent that these more fundamental issues are addressed, this may mitigate the need for a shorter compliance window. finally, as we move forward with basel iii implementation, we need to take a careful look at whether market risk and operational risk requirements are overlapping and redundant with the “ global market shock ” and operational risk elements of stress testing and think about the calibration of these requirements in the aggregate. would these tests in tandem produce excessively calibrated capital requirements, and if so, what would the impact be on u. s. capital markets? in my view, there are strong indications that as currently formulated, the combination of these requirements would result in an excessive calibration of risk - weighted assets for market

bank is unique, and one need look no further than the balance sheets, business activities, and risk profiles of large banks to observe this variability. but the onus is on regulators to ensure that over time, regulations and supervisory practices are applied fairly and consistently, and that evolution in the framework is accompanied by appropriate transparency for regulated entities. the challenge of creating rules that are fair and transparent is nowhere more notable than in stress testing. stress testing serves an important role in our regulatory framework, but one that requires evolution to ensure relevancy and effectiveness. to date, the evolution of stress testing has focused on refining the tests to be more robust over time and to provide more granular risk see, e. g., michelle w. bowman, “ my perspective on bank regulation and supervision, ” ( remarks to the american bankers association community banking conference, february 16, 2021 ), https : / / www. federalreserve. gov / newsevents / speech / files / bowman20210216a. pdf ; michelle w. bowman, “ large bank supervision and regulation, ” ( remarks at the institute of international finance, washington, d. c., september 30, 2022 ), https : / / www. federalreserve. gov / newsevents / speech / files / bowman20220930a. pdf ; and michelle w. bowman, “ independence, predictability, and tailoring in banking regulation and supervision, ” ( remarks to the american bankers association community banking conference, orlando, fl, february 13, 2023 ), https : / / www. federalreserve. gov / newsevents / speech / files / bowman20230213a. pdf. - 5information about these banks. while these incremental improvements have been helpful, the task of addressing identified problems is equally important. to be clear, these problems extend beyond model accuracy and consistency across firms. while by no means a comprehensive list, i would like to address four of my concerns in particular : ( 1 ) volatility in firm results from year to year, ( 2 ) the challenge of linking stress testing outcomes with capital through the stress capital buffer, ( 3 ) the broad lack of transparency, and ( 4 ) the overlap with other capital requirements like the overlap between the global market shock in stress testing and the market risk rule under the basel iii endgame proposal. volatility one area of particular concern is the year -