Group of Banks and Business Groups Sue Federal Reserve Over Stress Tests
A group of banks and business organizations is suing the Federal Reserve over the annual bank stress tests, citing “longstanding legal violations” and a lack of transparency in the process. The Bank Policy Institute, which represents big banks like JPMorgan, Citigroup, and Goldman Sachs, is leading the lawsuit, joined by the American Bankers Association, the Ohio Bankers League, the Ohio Chamber of Commerce, and the U.S. Chamber of Commerce.
The groups do not oppose stress testing, but argue that the current process is flawed and produces “vacillating and unexplained requirements and restrictions on bank capital.” They claim that the stress test process is opaque and has resulted in higher capital rules that hurt bank lending and economic growth.
The Federal Reserve has announced plans to make changes to the bank stress tests, seeking public comment on “significant changes to improve the transparency of its bank stress tests and to reduce the volatility of resulting capital buffer requirements.” However, the banks are not satisfied with the proposed changes, which they believe do not go far enough to address their concerns.
The lawsuit aims to “resolve longstanding legal violations by subjecting the stress test process to public input as required by federal law.” The Bank Policy Institute CEO, Greg Baer, welcomed the Fed’s announcement, but hinted at further action if the proposed changes do not meet their demands.