Washington, D.C. — The Bank Policy Institute, alongside the American Bankers Association, the U.S. Chamber of Commerce, the Ohio Bankers League and the Ohio Chamber of Commerce filed an opening brief today challenging opaque aspects of the Federal Reserve’s stress testing framework for bank capital.
What We’re Saying:
The groups argue that the Federal Reserve’s decisions concerning the stress tests can result in increased borrowing costs, hindering banks’ ability to support the economy:
“The substantive choices underlying these tests’ methodology are among the most consequential policy decisions made by any agency in the federal government, requiring banks to hold hundreds of billions of dollars in capital as protection against a potential economic downturn. When calibrated properly, capital requirements help ensure the safety and soundness of the financial system. But if capital requirements are set too high, or are subject to unpredictable year-to-year volatility, they force banks to withhold too much liquidity from the economy, resulting in higher lending costs and slower growth for the economy as a whole.”
The challenge also highlights how the opaque nature of this framework violates the Administrative Procedure Act by excluding public input and transparency:
“Currently the Board makes these enormously important policy decisions through a secretive process that eschews the disclosure and public participation required by the Administrative Procedure Act and other fundamental principles of administrative law and democratic government. …By refusing to put its stress-test models and scenarios through public notice and comment — and refusing to fully disclose the models at any point — the Board violates the APA, infringes on the public’s right to participate in rulemaking and hobbles its own decisionmaking by depriving itself of the benefit of the public’s input.”
More Context:
These tests represent an important element of the capital framework overall, and this legal action does not seek to eliminate them. Instead, the suit aims to ensure their methodology is subject to public oversight and scrutiny through transparent rulemaking.
What’s Next:
- March 21, 2025: Plaintiff trade associations filed a motion for summary judgment.
- April 29, 2025: The Federal Reserve files its opposition brief and cross-motion for summary judgment.
- May 27, 2025: The plaintiff trade associations file a consolidated opposition and reply brief.
- June 17, 2025: The Federal Reserve files its reply brief.
- Plaintiffs have requested that the Court enter a final decision on the merits by October 31, 2025.
To learn more about the challenge, please click here.
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About Bank Policy Institute.
The Bank Policy Institute is a nonpartisan public policy, research and advocacy group that represents universal banks, regional banks and the major foreign banks doing business in the United States. The Institute produces academic research and analysis on regulatory and monetary policy topics, analyzes and comments on proposed regulations, and represents the financial services industry with respect to cybersecurity, fraud, and other information security issues.
Media Contacts
- Austin Anton, Bank Policy Institute, austin.anton@bpi.com
- Jeff Sigmund, American Bankers Association, jsigmund@aba.com
- Evan Kleymeyer, Ohio Bankers League, ekleymeyer@ohiobankersleague.com
- Shira Rawlinson, U.S. Chamber of Commerce, srawlinson@uschamber.com
- Courtney Whetstone, Ohio Chamber of Commerce, cwhetstone@ohiochamber.com
