By Jon Hill

Law360 (October 7, 2020, 10:23 PM EDT) -- Sen. Elizabeth Warren, D-Mass., is calling for the nation's biggest banks to turn over information about their capital planning for economic turmoil from the coronavirus pandemic, warning that the Federal Reserve appears to be asleep at the switch as another financial crisis threatens.

In letters dated Wednesday, Warren asked the heads of 14 banks with assets of more than $250 billion to disclose details about their internal capital planning as well as their results from the "sensitivity analyses" that the Fed conducted earlier this year to gauge their ability to weather different COVID-19 recession scenarios.

"The Fed's failure to take commonsense measures to preserve capital at large financial institutions has unfortunately warranted even greater attention to the health of the largest banks," Warren said in the letters, which also asked about any capital planning concerns regulators may have flagged.

"I am requesting that you provide transparency into the health of your institution that the Fed has not yet provided," the senator wrote.

The Fed said in June that "most" of the nearly three dozen large banks it tested were able to maintain healthy capital levels in simulated short, long, and double-dip COVID-19 recessions, but "several" saw their capital levels erode close to regulatory minimums in certain scenarios.

The central bank also described some firms as having overly optimistic economic outlooks, weak credit cost forecasts or planning that wasn't "thoughtful," though no names were named and no individual firm results were disclosed.

Still, the results led the Fed to require banks with assets of more than $100 billion to pause stock buybacks and limit dividend payouts for the third quarter, measures intended to increase their capital cushions and strengthen them against potential economic stress from the pandemic.

Last week, the Fed said it was extending these measures for another quarter in light of "continued economic uncertainty" from the COVID-19 crisis. The Fed has also said previously that it expects to conduct another round of sensitivity analyses later this year and will provide bank-specific results.

But while Warren applauded this additional disclosure as an improvement, she said the Fed is still making decisions based on what she called its "incomplete and inadequate" initial round of pandemic stress-testing.

"Families and businesses should not have to wait for up to three additional months for basic transparency about our banking system," the senator wrote.

In addition, Warren argued that the Fed's decision to impose and extend limits on capital distributions won't actually keep big banks as strong as they need to be. Instead, the measures allow these banks to keep paying out dividends and thereby "deplete capital buffers at a time when they should be preserving them to support lending to households and small businesses," the senator said.

Warren added that the economic outlook has grown "even more grim" in recent weeks as coronavirus aid programs from the spring have run out and talks for an additional relief package have sputtered, increasing risks that the banking system may see more borrowers default.

"When regulators and banks failed to take these risks seriously in the years leading up to 2008, families lost their homes, jobs, and livelihoods," Warren wrote. "Given that bank regulators are again failing to protect the financial system and the American people in the middle of this unprecedented crisis, I ask that you provide the [requested] information no later than Oct. 21, 2020."

A Federal Reserve spokesman declined to comment on the letters. 

--Editing by Emily Kokoll.

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