Represented by the Bank Policy Institute (BPI), the American banking sector announced on Tuesday that it was taking legal action against the Federal Reserve (Fed) of the United States, denouncing the annual stress tests as “opaque” and detrimental to economic growth. These tests, established by the Dodd-Frank law after the 2008 financial crisis, are accused of causing “inadequate, volatile and excessive capital reserves, which reduce lending capacity and economic growth”.
The BPI, which brings together the country’s main banking and financial institutions, criticizes a framework which “limits the volume of loans” granted to individuals and businesses, thus affecting “employment, capital markets” and increasing the cost of credit. According to the plaintiffs, annual changes in minimum capital requirements are characterized as “erratic” and made “without notice,” creating “unnecessary uncertainty without providing benefits.”
The lawsuits, filed in Ohio, also involve the American Bank Association (ABA), the American Chamber of Commerce, and several entities in that state. The Ohio Bankers League clarifies that it is not a question of eliminating stress tests, but of making them “legal and effective in promoting a healthy and growing economy”.
Faced with these criticisms, the Fed announced the upcoming launch of a public consultation to improve transparency and reduce the volatility of capital requirements. If this initiative is hailed as an “important first step”, the plaintiffs justify their legal action by the need to respect the limitation period, set at February 2025. Asked to respond to this BPI initiative, the Fed did not further commented on these lawsuits.
Source: www.20minutes.fr
