Biggest Banks Sue the Federal Reserve Over Annual Stress Tests

A group of banks and business groups are suing the Federal Reserve over the annual bank stress tests. From a report: The Bank Policy Institute, which represents big banks like JPMorgan, Citigroup and Goldman Sachs, is joining the American Bankers Association, the Ohio Bankers League, the Ohio Chamber of Commerce and the U.S. Chamber of Commerce to file the suit, which they said aims to 'resolve longstanding legal violations by subjecting the stress test process to public input as required by federal law.'

The groups said they don't oppose stress testing, but that the current process falls short and 'produces vacillating and unexplained requirements and restrictions on bank capital.' The Fed's stress test is an annual ritual that forces banks to maintain adequate cushions for bad loans and dictates the size of share repurchases and dividends. After the market close on Monday, the Federal Reserve announced in a statement that it is looking to make changes to the bank stress tests and will be seeking public comment on what it calls 'significant changes to improve the transparency of its bank stress tests and to reduce the volatility of resulting capital buffer requirements.'

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