The mechanism: Every June, the Federal Reserve runs the largest U.S. banks through a hypothetical recession and spits out a Stress Capital Buffer (SCB) — the extra capital cushion each bank must hold on top of minimums. That number has swung by a percentage point or more year to year based on modeling noise, not fundamentals, forcing banks to hold a buffer against the buffer before committing to buybacks. In April 2025 the Fed proposed averaging two consecutive years of stress test results to calculate the SCB, and it has since delayed implementing new capital requirements while it works through the rulemaking — explicitly to cut that volatility. Less volatility in the SCB doesn't change a bank's earnings power. It changes how much capital a bank's board is willing to authorize for repurchase right now, because the tail-risk of a sudden capital-requirement spike that would force clawing back a buyback program is smaller. That's a governance and capital-allocation catalyst, and it moves ahead of — not because of — any change in loan growth or net interest margin.
Who cashes in: