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U.S. banking lobby groups said on Tuesday they had filed a lawsuit against the Federal Reserve over the central bank’s stress testing framework, marking a significant escalation between the industry and regulators.
The announcement comes a day after the Fed announced plans called for “significant changes” to its annual stress tests for major U.S. banks to make the process more transparent and the results less volatile.
“We appreciate the board’s announcement as a first step toward transparency and accountability, but believe it is necessary to file this lawsuit to protect our legal rights,” said Greg Baer, president and chief executive of the industry group Bank Policy Institute, one of five plaintiffs in the case. It is the first lawsuit BPI has filed against the Fed.
The Fed declined to comment.
The lawsuit, filed in federal court in Ohio, comes ahead of what the lobbying groups described as an approaching February deadline to launch a legal challenge to some of the lawsuits Stress test Regulate.
It also reflects something more aggressive approach in recent years by the banking industry. In 2023 and 2024, lobby groups waged a combative advertising campaign against the Fed’s proposed implementation of new capital rules, the so-called Basel III endgame, and lobby groups had threatened lawsuits.
The Fed has since scaled back its plans for the Basel III endgame, and the final outcome will be influenced by the new Trump administration.
The industry is now setting its sights on stress testing, an annual test to determine how well the largest U.S. banks – including JPMorgan Chase, Goldman Sachs and Bank of America – can withstand a range of catastrophic economic scenarios.
The last test examined how banks would deal with a 40 percent drop in commercial real estate prices and a 36 percent drop in real estate prices.
The Fed uses the results to calculate the total need for bank capital that can be used to absorb losses.
Stress tests helped restore confidence in the banking sector after the 2008 financial crisis. But recently they have come under fire because the models used in the process were not transparent and the results fluctuated every year.
In the lawsuit, the banking groups said they do not oppose annual stress testing but are pushing for greater transparency in the process and models used to forecast bank losses.
The groups said the Fed’s proposed changes to the stress testing framework could address industry concerns, but they filed the lawsuit to keep their options open.
The banks are aiming for any changes for the 2026 stress test cycle.
The bulk of the banks’ lawsuits were filed under the Administrative Procedure Act, which governs how government agencies make and enforce rules. A US Supreme Court ruling earlier this year kept in check The authorities have room for maneuver in setting regulations.
Banks are seeking to require the Fed to publish its stress testing models and scenarios and to allow public notice and comment on future models.
