Big Banks And Business Groups File a Lawsuit Against the US Federal Reserve Over Yearly Stress Tests.

Written By: Flipbz.org

Major U.S. banking trade groups, including the American Bankers Association and the Bank Policy Institute, have filed a lawsuit in the U.S. District Court for the Southern District of Ohio seeking increased transparency in the Federal Reserve's annual bank stress tests. These tests, implemented after the 2008 financial crisis, assess banks' resilience to economic downturns. The plaintiffs argue that the current stress test scenarios are unrealistic and that the resulting capital requirements restrict lending and economic growth. They are calling for the stress test process to be subject to public input, as mandated by federal law. 

In response, the Federal Reserve has proposed changes to enhance transparency, including disclosing and seeking public comment on the models that determine banks' hypothetical losses and revenues under stress, as well as on the annual hypothetical scenarios before they are finalized. Despite these proposed changes, the trade groups have proceeded with the lawsuit, citing uncertainty about the outcomes and aiming for modifications by 2026. 

A spokesperson for the Federal Reserve declined to comment on the lawsuit. This legal action mirrors another ongoing lawsuit against federal financial institutions over updates to the Community Reinvestment Act. 

Source: Yahoo Finance