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Federal Reserve stress tests face legal challenge as buffer criticism mounts

Federal Reserve building
Photo: Smith Collection/Gado/Getty Images

Intended to protect banks from catastrophe, stress testing and stringent capital buffer requirements face stiff resistance.

Groups representing the banking industry recently sued the Federal Reserve, arguing that the secret procedures the central bank uses to formulate its annual bank stress tests are illegal.

The tests are notable because they are conducted absent the notice-and-comment formula that defines the bulk of US regulation.

As such, the