In the United States, a group of banks and business groups are suing the Federal Reserve as part of an annual banking stress test.
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 US Chamber of Commerce in the framework of the mentioned suit. In this case, the purpose of the actions is to resolve long-standing legal violations by applying the stress test practice by subjecting the process to public input as required by federal law.
The groups don’t mind stress testing. At the same time, they note that the current process falls short and generates unstable and unexplained capital requirements and restrictions for banks.
The Fed’s stress test is a kind of annual ritual that forces lenders to maintain adequate cushions for bad loans and dictate the size of share repurchases and dividends.
Last Monday, December 23, the US financial regulator announced its intention to make changes to bank stress tests. The Fed also announced plans to initiate a public discussion of what it calls significant changes to improve the transparency of its bank stress tests and to reduce the volatility of resulting capital buffer requirements.
Moreover, the central bank of the United States made the determination to alter the tests because of the evolving legal landscape, pointing to changes in administrative laws in recent years.
According to media reports, the changes made may not be enough to satisfy lenders’ concerns about onerous capital requirements.
As we have reported earlier, Hong Kong Picks Several Banks and Tech Firms to Test GenAI in Financial Sector.
