US banks, companies sue Federal Reserve over stress testing

Groups representing US banks and companies said on Monday they had filed a lawsuit against the Federal Reserve over what they called “ambiguities in the stress testing framework.”

The lawsuit “seeks to resolve ongoing legal violations by subjecting the stress testing process to public input as required by federal law,” groups including the American Bankers Association and the US Chamber of Commerce said in a statement. According to Reuters, the Federal Reserve’s stress testing assesses banks’ ability to withstand losses in times of crisis through their available liquidity while meeting their obligations to customers and continuing to lend to businesses and households. The Fed sets liquidity reserve requirements based on the test results.

The Fed conducts stress testing annually using at least two different scenarios to test liquidity adequacy during times of crisis.