Big American banks and business groups sued the Federal Reserve
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The lawsuit is the latest example of the banking industry getting bolder and challenging their regulatory powers in court, especially in the wake of recent US Supreme Court rulings that impose new limits on administrative discretion. .
The recent Supreme Court decision to overturn the 1984 Chevron doctrine significantly limited federal agencies’ authority to interpret ambiguous statutes. limits The ruling affects an ongoing lawsuit by banks and trade groups against the Federal Reserve over annual stress tests.
While the Dodd-Frank Act of 2010 requires the Federal Reserve to test banks’ balance sheets, the Federal Reserve’s specific capital adequacy analysis and subsequent capital requirements are not legally required. Plaintiffs argue that the Fed’s confidential methods for evaluating bank performance and creating test scenarios should be public and subject to feedback.
These groups believe they support the stress test program, but seek greater transparency and accountability to ensure the process provides meaningful and fair insight into bank resilience.
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The Federal Reserve announced on Monday that it plans to pursue similar changes before the 2025 exams, citing recent legal developments, but this announcement did not prevent banks from filing complaints. A spokeswoman for the Federal Reserve declined to comment on the lawsuit on Tuesday.
Rob Nichols, President and CEO The American Bankers Association said in a statement that the vague nature of these tests undermines their value in providing meaningful insight into bank resilience.
He expressed hope that the Fed would address long-standing problems with stress tests and said the lawsuit would preserve the ability of financial institutions to pursue legal remedies if the Fed defaults. .
These tests, which banks have complained about for years because they are not transparent and subjective, are the central core of the banking-capital supervisory structure of America. The Fed has long resisted calls to make the testing process more transparent, out of concern that it could make it easier for banks to pass tests.
How banks perform in the test shows how much capital they have to set aside to fulfill their obligations and also determines the scope of dividend payments and share buybacks.
