US banks clear Fed stress test; paving way to boost buybacks, dividends
|As the US Federal Reserve finds the banks well-capitalized in its latest stress results, per Reuters, large banks will no longer face pandemic-era restrictions on how much they can spend buying back stock and paying dividends.
Additional statements…
The central bank said the test found 23 of the largest firms would suffer a combined $474 billion in losses under a hypothetical severe downturn, but that would still leave them with more than twice as much capital required under Fed rules. As a result, the Fed will lift limits on buybacks and dividends it had put in place at the onset of the coronavirus pandemic.
The results were met by a sigh of relief on Wall Street, where firms had been limited on what they can pay out to investors.
Market implications
As the news suggests the Fed’s indirect recalling of the pandemic-led relief measures, market players do worry for the monetary policy adjustments and the same weigh on the risk appetite.
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