The Banking Policy Institute – along with the American Bankers Association, the US Chamber of Commerce, the Ohio Bankers League and the Ohio Chamber of Commerce – announced this Tuesday, 24, that it is filing a lawsuit against the Federal Reserve (Fed), questioning the structure of the stress test.
While the test is an important risk management tool for banks and supervisors, the lawsuit seeks to resolve long-standing legal violations by subjecting the stress testing process to public opinion as required by federal law, the American Association of of Bankers.
“For years, we have highlighted serious concerns about the stress testing framework and the need for reform. The current regime, combined with a lack of clear standards, continues to produce capital charges that are inaccurate, volatile and excessive, resulting in reduced lending and economic growth,” said Greg Baer, president and CEO of the Banking Policy Institute.
On Monday, the 23rd, the Fed announced that it is considering major changes to its annual bank “stress tests” in light of recent legal developments, including allowing creditors to provide comments on the models used.
