Official announcements from BPI and the Federal Reserve

Major U.S. Banks, Represented by BPI, Plan to Sue Federal Reserve Over Stress Tests Tuesday Morning

Dec 24, 2024, 01:04 PM

Major U.S. banks are planning to sue the Federal Reserve over its annual stress tests, with the lawsuit expected to be filed as soon as Tuesday morning, according to a person familiar with the matter. The banks, represented by groups like the Bank Policy Institute (BPI), have long criticized the stress tests for being opaque and secretive, which they argue leads to stringent capital rules that impact their operations. The Federal Reserve's stress tests are designed to ensure banks maintain sufficient capital to withstand economic downturns and influence their ability to engage in share repurchases and dividend payments. In response to the impending lawsuit, the Federal Reserve announced plans to seek public comment on proposed changes to the stress tests to enhance transparency and reduce volatility in capital buffer requirements. However, these changes are not expected to significantly alter overall capital requirements, which may not fully address the banks' concerns. Greg Baer, CEO of BPI, which represents big banks like JPMorgan, Citigroup, and Goldman Sachs, welcomed the Fed's announcement but hinted at further action, citing the need for reforms that comply with the Administrative Procedure Act.