The Committee on Capital Markets Regulation (the “Committee”) released a legal analysis of the Federal Reserve’s stress test process, concluding that the Federal Reserve likely has not complied with the Administrative Procedure Act of 1946 (the “APA”) in adopting key aspects of its Comprehensive Capital Analysis and Review (“CCAR”) stress tests that quantify whether under future adverse economic conditions a bank can maintain sufficient capital to meet regulatory minimums.

The Committee recommends that the Federal Reserve follow the APA’s procedural requirements in developing key aspects of its stress tests because doing so would result in better public policy outcomes and reduce the threat of legal challenge to the Federal Reserve’s actions.

Read the full report here.