Big banks planning to sue US Fed over annual stress tests, CNBC reports

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

A lawsuit is expected this week and could come as soon as Tuesday, the report said.

This highlights the extent to which banks are prepared to go to persuade the central bank to scale back capital requirements the industry deems too harsh.

The report comes just a day after the Fed said it was mulling major changes to the stress tests, which gauge the ability of a bank to weather losses during periods of severe economic downturn.

These tests determine the capital banks must set aside to meet their obligations and also dictate the scope of dividend payouts and stock buybacks.

The Federal Reserve said it could potentially allow banks to provide input on the hypothetical scenarios it uses for these annual health checks and might also average results over two years to reduce annual volatility in the results.

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

JPMorgan Chase (NYSE:JPM) declined to comment. Goldman Sachs and Citigroup (NYSE:C) did not immediately respond to Reuters requests for comment.