Most US banks can pay dividends, buy back shares in July: Federal Reserve

[WASHINGTON] Most American banks will be able to pay out dividends and buy back shares after June 30, the Federal Reserve said on Thursday, further relaxing restriction implemented to safeguard the US financial system during the pandemic.

The central bank in June 2020 ordered 34 major US banks to suspend buybacks and limit dividend payments as Covid-19 caused a sharp economic downturn, then relaxed those restrictions in December, allowing a limited capital distributions to an amount based on previous income.

In a statement, the Fed said banks will be able to make buybacks and dividend payments after the current round of financial resilience stress tests are over.

"The banking system continues to be a source of strength and returning to our normal framework after this year's stress test will preserve that strength," Fed Vice Chair for Supervision Randal Quarles said.

Firms that have capital above the limits of the stress tests will have the restrictions lifted.

Those that fall below the stress test limits will face the restrictions through September 30, and if they remain below the limits then, will have stricter measures imposed, the Fed said.

The Fed normally conducts one stress test a year, but added a second in 2020 given the pandemic and the ensuing downturn.

In its statement, the central bank noted that "after two rounds of stress tests last year, the Board found that large banks had strong capital levels."

AFP