The Fed is being sued by a series of major banks and businesses in the U.S.
A group of bankers and businesses is suing the U.S. Federal Reserve (Fed) over the agency's annual bank tests.
The Bank Policy Institute, representing major banks like JPMorgan, Citigroup, and Goldman Sachs, along with the American Bankers Association, the Ohio Bankers League, the Ohio Chamber of Commerce, and the U.S. Chamber of Commerce, has filed a lawsuit against the Fed.
They argue that the "stress testing" process of the U.S. banking system has many limitations with unclear and unreasonable capital requirements.
The Fed introduced the "stress test" for the banking system in the U.S. after the financial crisis of 2007-2009 to assess the ability of large banks to cope with economic shocks. This test is a core element of the financial system in the U.S., determining the amount that lenders must set aside to cover losses and the amount they can return to shareholders.
After the market closed on Monday (12/24), the Fed announced that it is considering allowing banks to participate in the process of building models and hypothetical scenarios used in these tests. Additionally, the U.S. central bank may also average the results of the tests over two consecutive years to mitigate the annual volatility in capital requirements for banks.
The Fed stated that it decided to change the tests due to the "changing legal landscape," pointing to changes in administrative law in recent years. The Fed did not specify any particular changes to the framework of the annual stress tests.
(According to CNBC)
