Following the Federal Reserve's announcement of reform plans, the Bank Policy Institute and the Financial Services Forum issued statements welcoming the move.

During Friday's trading session in U.S. stocks, shares of large financial institutions, including bank stocks, surged across the board. By the close, Goldman Sachs had risen over 4%, while JPMorgan Chase, Morgan Stanley, Citigroup, and Wells Fargo all gained over 2%. Bank of America increased by 1.56%.

Additional analysis pointed out that market expectations that Federal Reserve interest rate cuts would stimulate economic activity also contributed to the strength in U.S. large financial institution stocks. According to the CME FedWatch Tool, the probability of a December rate hike jumped to 98.5% from about 91% before the data release, while the probability of a rate cut next week remains above 95%.

However, it is worth noting that within the Federal Reserve, the aforementioned reform plan has sparked significant disagreement. Michael Barr, the former Chief Supervision Officer and current Federal Reserve Governor, stated in his prepared remarks that he opposes the practice of disclosing test content in advance, believing it undermines the credibility of the tests.

Barr pointed out that this new model risks turning stress tests into a rigid, formalistic process that only provides a false sense of security. Less conservative modeling choices and potential bank gaming of the system could both lead to overly optimistic test results.

Jeremy Kress, former Federal Reserve banking policy attorney and now a professor of business law at the University of Michigan, criticized the Fed's move as a "compromise" to bank litigation. He stated that no legal requirement forces the Fed to turn stress tests into an "open-book exam" where banks help set the questions. This is entirely a policy choice, and a bad one at that.

In fact, as early as December last year, the Federal Reserve indicated it would reform the stress testing process. However, in the same month, several industry associations sued the agency, accusing it of "secretly setting" standards, leading to "arbitrary and unexplained" bank capital requirements. The institutions represented by these associations include JPMorgan Chase, Goldman Sachs Group, and Bank of America.

According to previous U.S. media reports, the Federal Reserve has presented a revised plan to other U.S. regulators that significantly relaxes capital requirements for large Wall Street banks. This marks the latest signal of financial deregulation since the Trump administration took office.

Some officials estimate that the new plan would reduce the overall capital increase for most large banks to between 3% and 7%. This figure is far lower than the 19% increase proposed in the 2023 proposal and also below the 9% increase suggested in last year's compromise version. Banks with larger trading business portfolios might see even smaller increases, or possibly even decreases.