Major banks plan to sue the US Federal Reserve over its annual stress tests, CNBC reports

(Reuters) – Major banks plan to sue the U.S. Federal Reserve over the regulator’s annual stress tests, CNBC reported on Tuesday, citing a source familiar with the matter.

The report said a lawsuit is expected to be filed this week and could be filed on Tuesday.

This highlights how far banks are willing to go to persuade the central bank to reduce capital requirements that the industry considers too harsh.

The report comes just one day after the Fed announced it was considering making major changes to its stress tests, which measure a bank’s ability to withstand losses during periods of severe economic downturn.

These tests determine the capital that banks must allocate to meet their obligations, and also determine the scope of dividends and share repurchases.

The Fed said it would likely allow banks to provide input on the hypothetical scenarios it uses for these annual health checks, and perhaps also average results over two years to reduce annual fluctuations in results.

However, the regulator said that “the proposed changes are not designed to materially impact overall capital requirements.”

JPMorgan Chase declined to comment. Goldman Sachs and Citigroup did not immediately respond to Reuters’ requests for comment.

(Reporting by Niket Nishant in Bengaluru; Editing by Pooja Desai)