A group of banks and business groups is suing the Federal Reserve over its annual bank stress tests.
The Banking Policy Research Institute represents major banks including: JP Morgan, citygroup and goldman sachsis joining the American Bankers Association, the Ohio Bankers League, the Ohio Chamber of Commerce, and the U.S. Chamber of Commerce in filing the lawsuit, which aims to “incorporate public input, as appropriate, into the stress testing process. “By doing so, we are resolving long-standing violations of the law.” By federal law. ”
The groups do not oppose stress tests, but said the current process is insufficient and “results in unstable and unaccountable requirements and restrictions on bank capital.”
CNBC earlier reported on the plans to sue.
The Fed’s stress tests are an annual ritual that forces banks to maintain adequate cushions against bad loans and determines the size of stock buybacks and dividends.
After markets closed on Monday, the Fed announced in a statement that it is considering changes to the bank stress test and will seek public comment on “significant changes to improve transparency and reduce risk in the bank stress test.” did. the resulting volatility of capital buffer requirements; ”
The Fed pointed to changes in administrative law in recent years and said it decided to change the test due to the “evolving legal landscape.” No specific amendments to the annual stress testing framework were outlined.
Big banks will see this change as a victory, but it may be too late.
The changes also may not be enough to satisfy banks’ concerns about onerous capital requirements. “These proposed changes are not intended to materially impact overall capital requirements,” the Fed said.
BPI CEO Greg Baer welcomed the Fed’s announcement in a statement, saying, “Today’s Board announcement is a step toward transparency and accountability.”
But Baer also hinted at further action: “We are looking at this closely and considering additional options to ensure timely reforms that are both good law and good policy.” did.
Groups such as BPI and the American Bankers Association have criticized stress testing processes in the past, arguing that they are opaque and that, as a result, increased capital requirements are hurting bank lending and economic growth. have expressed concerns about it.
In July, the group accused the Fed of violating the Administrative Procedure Act by not seeking public comment on stress scenarios and keeping its supervisory model secret.
Click here for more information on complaints.
—CNBC’s Hugh Son contributed to this report.
