Kevin Lamarque / Reuters
- The Federal Reserve on Thursday imposed new restrictions on the US banking system after its annual stress test showed that some banks may approach minimum capital levels in certain coronavirus pandemic scenarios.
- Banks must suspend the buyback of shares for the third quarter of the year, the central bank said in a statement.
- In addition, the board also limits dividend payments and requires big banks to resubmit and update capital plans by the end of the year to reflect current tensions.
- Read more on Business Insider.
The Federal Reserve on Thursday imposed new restrictions on the US banking system after its annual stress test showed that some banks would approach minimum capital levels in certain coronavirus pandemic scenarios.
“For the third quarter of this year, the Board requires large banks to retain capital by suspending share buybacks, limiting dividend payments and allowing dividends according to a formula based on recent earnings,” said the Federal Reserve it’s a statement.
In addition, the regulator is also requiring banks to reevaluate their long-term capital plans, he said. It is the first time since the financial crisis that the Federal Reserve has imposed new restrictions on the American banking system.
“The banking system has been a source of strength during this crisis,” Vice President Randal K. Quarles said in a statement, adding that “the results of our sensitivity analyzes show that our banks can remain strong even in the face of the most severe shocks. ” “
read more: A high-growth fund manager is tripling her peers’ performance in 2020 while targeting non-technology industries like beer and restaurants. She analyzes how she chose 5 of the most innovative companies.
The Fed said all major banks will need to resubmit and update capital plans later in the year to reflect current tensions. This will help companies “reevaluate their capital needs and maintain sound capital planning practices during this period of uncertainty,” according to the central bank.
In the future, the board will conduct additional quarterly reviews to determine if adjustments to the response are appropriate.