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US banking lobby groups said on Tuesday they had filed a lawsuit against the Federal Reserve over the central bank's stress-testing framework, a major escalation between the industry and regulators.
The announcement comes a day after the Fed announced plans for “significant changes” to annual stress tests for large US banks in an effort to make the process more transparent and the results less volatile.
“We appreciate the board's announcement as a first step toward transparency and accountability, but we believe it is necessary to file this lawsuit to preserve our legal rights,” said Greg Baer, president and head of industry group Policy Bank. Institute, one out of five. the plaintiff in the case. It is the first lawsuit BPI has filed against the Fed.
The Fed declined to comment.
The lawsuit, filed in a federal court in Ohio, comes ahead of what lobby groups said was a looming February deadline to bring a court challenge to some of the stress test rules.
It also reflects a more aggressive approach in recent years by the banking industry. In 2023 and 2024, lobby groups waged a warring advertising campaign against the Fed's proposed implementation of new capital rules, the so-called Basel III Endgame, and lobby groups had threatened to file lawsuits.
Since then, the Fed has scaled back its plans for the Basel III endgame, and the final outcome will be influenced by the incoming administration of Donald Trump.
The industry is now targeting stress tests, an annual examination to see how well the biggest US banks – including JPMorgan Chase, Goldman Sachs and Bank of America – can withstand a series of catastrophic economic scenarios.
The most recent test looked at how banks would cope with a 40 percent drop in commercial real estate prices and a 36 percent drop in residential prices.
The Fed uses the results to calculate the overall requirements for bank capital that can be used to absorb losses.
Stress tests played a role in restoring confidence in the banking sector after the financial crisis of 2008. But they have recently been criticized for a lack of transparency on the models used in the process and the volatility of the results each year.
In the lawsuit, the banking groups said they do not oppose the annual stress tests, but are pushing for greater visibility into the process and models used to project bank losses.
The groups said the Fed's proposed changes to the stress test framework could address industry concerns, but they had filed lawsuits to keep their options open.
Banks expect no change for the 2026 stress test cycle.
Most of the banks' lawsuits were filed under the Administrative Procedure Act, which sets out how government agencies create and enforce rules. A U.S. Supreme Court ruling earlier this year curbed agencies' rulemaking freedom.
Banks are seeking to ask the Fed to publish stress test models and scenarios and allow public notice and comment on future models.
