The Federal Reserve is being sued by several groups representing America’s biggest banks on allegations that the Fed’s annual capital “stress tests” violate US law.
Groups including the Bank Policy Institute, the Ohio Bankers League, the Ohio Chamber of Commerce, the U.S. Chamber of Commerce and the American Bank Association (ABA) have filed a joint lawsuit with the U.S. District Court in Columbus, Ohio.
The suit alleges that the Fed’s system for testing how big banks would handle a potential economic crisis doesn’t follow proper administrative procedure.
On Monday, the Fed released a press release saying it was considering how to increase the transparency of bank stress tests and reduce the volatility of its capital requirements. While the banking lobby believes that’s a “positive step,” they say that litigation is still needed to preserve their legal rights given an upcoming statute of limitations deadline.
The suit says that the Fed’s stress test systems were “adopted in secret” and contain “vacillating and unexplained requirements and restrictions on bank capital.”
The goal of the suit is to ensure that bank capital requirements are established in a transparent manner with public input and in accordance with the Administrative Procedure Act and the Due Process Clause, beginning in 2026.
In a statement posted to its website, ABA president and CEO Rob Nichols says the Fed’s stress tests are “opaque” in nature, undermining their “value for providing meaningful insights into bank resilience.”
Nichols says the ABA is pushing for more transparency behind the tests to create a fairer regulatory environment.
“While we support stress testing as an important risk management tool, ABA has long advocated for the Federal Reserve to increase the transparency of its stress testing program, which shields key components like supervisory models from public view.”
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The post Lobby Representing JPMorgan, Goldman Sachs and Others Sue Federal Reserve Alleging ‘Stress Tests’ Violate Law appeared first on The Daily Hodl.
