A general view of the Federal Reserve Building in Washington, United States.
Samuel Corum | Anadolu Agency | Getty Images
The biggest banks are planning to sue the Federal Reserve over the annual bank stress tests, according to a person familiar with the matter. A lawsuit is expected this week and could come as soon as Tuesday morning, the person said.
The Fed’s stress test is an annual ritual that forces banks to maintain adequate cushions for bad loans and dictates the size of share repurchases and dividends.
After the market close on Monday, the Federal Reserve announced in a statement that it is looking to make changes to the bank stress tests and will be seeking public comment on what it calls “significant changes to improve the transparency of its bank stress tests and to reduce the volatility of resulting capital buffer requirements.”
The Fed said it made the determination to change the tests because of “the evolving legal landscape,” pointing to changes in administrative laws in recent years. It didn’t outline any specific changes to the framework of the annual stress tests.
While the big banks will likely view the changes as a win, it may be too little too late.
Also, the changes may not go far enough to satisfy the banks’ concerns about onerous capital requirements. “These proposed changes are not designed to materially affect overall capital requirements, according to the Fed.
The CEO of BPI (Bank Policy Institute), Greg Baer, which represents big banks like JPMorgan, Citigroup and Goldman Sachs, welcomed the Fed announcement, saying in a statement “The Board’s announcement today is a first step towards transparency and accountability.”
However, Baer also hinted at further action: “We are reviewing it closely and considering additional options to ensure timely reforms that are both good law and good policy.”
Groups like the BPI and the American Bankers Association have raised concerns about the stress test process in the past, claiming that it is opaque, and has resulted in higher capital rules that hurt bank lending and economic growth.
In July, the groups accused the Fed of being in violation of the Administrative Procedure Act, because it didn’t seek public comment on its stress scenarios and kept supervisory models secret.
Check out the companies making headlines in premarket trading. Novo Nordisk — The stock jumped about 5%, rebounding from the nearly 18% losses seen in the previous session. On Friday, the Danish pharmaceutical giant’s experimental weight loss drug, CagriSema, reported late-stage trial results that missed expectations . Honda – U.S.-listed shares surged 15% after the company officially began merger talks with fellow Japanese automaker Nissan. The automakers plan to conclude discussions in June 2025. Xerox — The document services provider added nearly 7% after announcing its acquisition of printer maker Lexmark. The deal is worth $1.5 billion. Occidental Petroleum , Sirius XM , VeriSign — The stocks continued to rise in Monday’s premarket after Warren Buffett disclosed last week that his Berkshire Hathaway conglomerate added to its stake in each name. Occidental and Sirius XM each climbed more than 2%, while VeriSign advanced 1.8%. Tesla — The electric vehicle maker bounced 3% before the bell, regaining some ground after last week’s decline. Tesla slid 3.5% last week, which marked its worst weekly performance since before the U.S. presidential election. Despegar.com — Shares soared 32% after Prosus entered into a definitive agreement to buy the Argentina-based online travel platform for $19.50 per share. Prosus will pay $1.7 billion as part of the deal, which is expected to close in the second quarter of 2025. Traws Pharma — Shares of the clinical-stage virology company skyrocketed more than 76% after it announced progress in the development of its treatment for H5N1 bird flu. The company said tivoxavir marboxil showed safety and tolerability in the phase 1 trial, and it will begin a phase 2 study early next year. The news comes as the threat of bird flu is expected to rise. Immunocore — The biotech stock rose more than 5% on word that the first patient has been dosed with its experimental immunotherapy treatment, IMC-0115C. — CNBC’s Sean Conlon and Christina Cheddar Berk contributed reporting
Investors may want to consider adding exposure to the world’s second-largest emerging market.
According to EMQQ Global founder Kevin Carter, India’s technology sector is extremely attractive right now.
“It’s the tip of the spear of growth [in e-commerce] … not just in emerging markets, but on the planet,” Carter told CNBC’s “ETF Edge” this week.
His firm is behind the INQQ The India Internet ETF, which was launched in 2022. The India Internet ETF is up almost 21% so far this year, as of Friday’s close.
‘DoorDash of India’
One of Carter’s top plays is Zomato, which he calls “the DoorDash of India.” Zomato stock is up 128% this year.
“One of the reasons Zomato has done so well this year is because the quick commerce business blanket has exceeded expectations,” Carter said. “It now looks like it’s going to be the biggest business at Zomato.”
Carter noted his bullishness comes from a population that is just starting to go online.
“They’re getting their first-ever computer today basically,” he said, “You’re giving billions of people super computers in their pocket internet access.”