The U.S. Federal Reserve announced on Thursday it will cap big bank dividend payments and bar share repurchases until at least the fourth quarter after finding lenders faced significant capital losses when tested against an economic slump caused by the coronavirus pandemic.
The Fed determined that although banks could weather a severe, tumultuous and prolonged economic downturn, several would cut close to their minimum capital requirements.
The Fed’s actions were unprecedented. It was the first time since the central bank implemented stress tests during the 2007-2009 financial crisis that it had to fundamentally alter its annual exam for a dramatic economic swing. Without naming any particular bank, the Fed said some relied on “more optimistic than appropriate” outlooks and that their capital planning “has not been thoughtful.”
Banks privately received their specific results from the Fed on Thursday. They can adjust original plans to get a better assessment, and release those details after the market closes on Monday.
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Federal Reserve Places New Restrictions On Banks, Freezing Stock Buybacks And Limiting PayoutsI am a New York—based reporter for Forbes covering breaking news, with a focus on financial topics. Previously, I wrote about investing for Money Magazine and was an intern at Forbes in 2015 and 2016. I graduated from the University of St Andrews in 2018, majoring in International Relations and Modern History. Follow me on Twitter skleb1234 or email me at sklebnikovforbes.com
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