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Fed changes stress test framework due to lawsuit by end of 2025?
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US•JPMorgan Chase•Goldman Sachs•Citigroup•Federal Reserve•Bank Policy Institute•American Bankers Association•Great Recession•Banks
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Official announcement or policy change from the Federal Reserve
Story
Major US Banks and Trade Groups Sue Fed Over Opaque Stress Testing Framework
Dec 24, 2024, 02:46 PM
Several major US banks and business groups, including JPMorgan Chase ($JPM), Goldman Sachs ($GS), and Citigroup ($C), have filed or are planning to file a lawsuit against the Federal Reserve over the annual stress tests, with a lawsuit expected as soon as today. Filed this week by trade groups such as the Bank Policy Institute, American Bankers Association, and the U.S. Chamber of Commerce, the lawsuit challenges the Federal Reserve's stress testing framework. The banks allege that the tests are flawed, opaque, secretive, and violate the law. The stress tests, a ritual since the Great Recession, assess banks' ability to withstand economic downturns and dictate capital requirements, impacting share repurchases and dividends. Banks argue that the stress tests unfairly affect their capital requirements and seek to force the central bank to open the design of the tests to public comment. The lawsuit follows the Federal Reserve's announcement on Monday regarding significant changes to the bank stress tests following recent legal rulings.
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