Will Wall Street File Suit Over the Fed’s Stress Tests? | White & Case LLP International Law Firm, Global Law Practice
Will Wall Street File Suit Over the Fed’s Stress Tests?

Will Wall Street File Suit Over the Fed’s Stress Tests?

Big banks and their trade groups are weighing a possible legal challenge against the Federal Reserve's annual 'stress tests," the New York Post reported.

Annual stress tests evaluate how well the financial firms would endure another financial crisis. The annual Federal Reserve tests are expensive, data-intensive and time-consuming, and, if a bank doesn’t pass a test, it will have a huge impact on the company.

The discussions are still in early stages and may not lead to a legal challenge, as the banks are divided on pursuing a fight, The Wall Street Journal initially reported.

"It's a broader issue of how much control should a bank supervisor should have over a bank as opposed to oversight," said Ernie Patrikis, White & Case partner and former general counsel of the Federal Reserve Bank of New York.

"This has taken away the approval of dividends away from shareholders and put it in the [Fed's] board of governors," he said.