Better Markets, a Washington-based non-profit, has sued the US Federal Reserve over its handling of a sweeping overhaul of bank capital rules, alleging that private discussions with Wall Street breached federal rule-making requirements.
The action, filed in Washington DC on Thursday, names the central bank and Michelle Bowman, the Fed’s vice-chair for supervision. It challenges contacts Ms Bowman is alleged to have had with banks while the proposals remained subject to public consultation.
Better Markets claims those discussions violated the Administrative Procedure Act, which governs the way federal agencies develop and adopt regulations. The organisation alleges that officials are barred from discussing matters linked to an active rule-making process with interested private parties.
The complaint refers to reports that Ms Bowman told Wall Street leaders to support capital plans viewed as favourable to the industry and to stop seeking exemptions. It also cites earlier reporting that the banking sector had pressed forcefully for changes to the Fed’s original 2023 capital plan in an effort to secure further relief.
The lawsuit describes the process as a “bad faith and corrupted rulemaking” and asks the court to intervene in the continuing proceedings. The allegations have not been tested in court.
A Federal Reserve spokesperson did not immediately respond to a request for comment. Ms Bowman has previously said the aim of the changes is to streamline regulation and supervision and make them more closely aligned with the risks facing banks.
The dispute concerns a package of proposals covering capital requirements for the largest banks, additional buffers for systemically important institutions and rules applying to other banking organisations. Better Markets has opposed the measures, arguing that they would weaken safeguards introduced after the 2008 financial crisis.
Legal challenges to the Federal Reserve’s rule-making are unusual, although major banks sued the central bank in 2024 over its annual stress tests and fair-lending rules. The latest case adds to opposition to the Trump administration’s efforts to reduce financial regulation and supervisory requirements.
