US banks pass Fed solvency tests and may increase buybacks and dividends

By Pete Schroeder and David Henry

WASHINGTON, Jun 24 (.) – Big banks will no longer have to face pandemic-era restrictions on how much they can spend on share buybacks and dividend payments, the Federal Reserve announced on Thursday. find that they were still well capitalized in their last solvency test.

The central bank said the test determined that 23 of the largest companies would suffer a total of $ 474 billion in losses in the event of a hypothetical severe recession, but would still have more than twice the capital required by Federal Reserve regulations.

As a result, the Fed will lift the limits on buybacks and dividends that it had set at the start of the coronavirus pandemic.

The results will be greeted with relief on Wall Street, where companies were limited in what they could pay investors.

Analysts expect banks like JPMorgan Chase, Bank of America and Goldman Sachs to be able to pay more than $ 100 billion together in the next four quarters.

The severity of the losses as tested will be a factor in setting the new capital requirements for each company and setting the limits on future dividends and share buybacks.

Banks suffered heavy losses in the test, in which the hypothetical unemployment rate soared to 10.75%, the stock market lost more than half its value, and the economy contracted 4%, driven by losses. especially strong in commercial real estate.

Still, the Fed said banks’ overall capital ratios only fell to 10.6%, more than double the regulatory minimum.

(Reporting by Pete Schroeder in Washington and David Henry in New York, Edited in Spanish by Javier López de Lérida)

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