Several large U.S. banks plan to sue Fed over annual bank stress tests: people familiar with the matter

On 24 December, it was reported that several large banks are planning to sue the Federal Reserve over the annual bank stress tests, a person familiar with the matter said. The person said the lawsuit is expected to be filed this week, possibly as early as Tuesday morning local time. The Fed's stress test is an annual routine that requires banks to stockpile adequate buffers for non-performing loans and sets the size of stock buybacks and dividends.

After the close of trading on Monday this week, the Fed announced in a statement that it plans to make adjustments to the bank stress tests, but it did not detail specific adjustments to the annual stress test framework. But these adjustments may not be enough to eliminate banks' concerns about onerous capital requirements. That's because the Fed said, ‘These proposed adjustments are not intended to have a material impact on overall capital requirements.’

Greg Bell, CEO of the Bank Policy Institute (BPI), which represents major banks such as JPMorgan Chase, Citigroup, and Goldman Sachs, welcomed the Fed's statement, saying in a statement, ‘Today's statement from the Fed is a first step toward transparency and accountability.’ However, Bell also hinted at possible further action, ‘We are carefully studying the statement and considering additional steps to ensure timely reforms that are both legally and policy-compliant.’