Federal Court Extends Stay in Lawsuit Challenging Stress Testing

A federal court extended a stay in the proceedings of a lawsuit brought by several banking industry groups challenging the Federal Reserve's ("FRB") "lack of transparency" in the stress testing process.

The US District Court for the Southern District of Ohio granted the second joint motion, filed by plaintiffs—the Bank Policy Institute, the US Chamber of Commerce, the Ohio Chamber of Commerce, the Ohio Bankers League and the American Bankers Association—and the Federal Reserve. The Court previously stayed the case until August 1, 2025, in anticipation of regulatory action.

As previously covered, the plaintiffs alleged that the FRB's process for conducting bank stress tests violates the Administrative Procedures Act by failing to: (i) subject the stress testing scenarios and models to notice-and-comment rulemaking and (ii) publish the rules and methodologies, thereby leaving regulated parties without fair notice of the standards applied. The plaintiffs also claimed that the process lacks transparency and imposes arbitrary capital requirements, causing significant financial and operational burdens.

The parties requested more time, citing ongoing progress toward rulemaking that could resolve the dispute through the notice-and-comment process. The Court extended the stay until October 15, 2025.