Thursday, 14 March 2013

Federal Reserve approves most bank capital plans

The US central bank has said that most major US banks have strong enough balance sheets to proceed with their plans for payouts to shareholders.
The Federal Reserve signed off the plans of 16 of 18 banks, but rejected the plans of BB&T and government-controlled Ally Financial.
It also asked Goldman Sachs and JP Morgan Chase to modify their plans.
Following the announcement, banks including Bank of America announced share buybacks and dividend payouts.
This follows on from the Fed's annual "stress tests" of the banks' financial health, which it said that all the 18 biggest US lenders had passed except for Ally, the government-controlled rescued former finance arm of carmaker General Motors.
"Now in its third year, the Federal Reserve's review of capital plans provides a regular, structured, and comparative way to promote and assess the capacity of large bank holding companies to understand and manage their capital positions, with particular emphasis on risk-measurement practices," Federal Reserve governor Daniel Tarullo said.
"The Federal Reserve did not object to the capital plans for Goldman Sachs Group and JP Morgan Chase, but required the two institutions to submit new capital plans by the end of the third quarter to address weaknesses in their capital planning processes."
Ally and BB&T though will have to obtain prior written approval from the Fed to make any payouts to shareholders.
The Fed said that JP Morgan and Goldman had been given permission to start raising dividends or share buybacks - but that this would be withdrawn if they didn't submit new capital plans that satisfied the Fed.
Citigroup plans to buy back $1.2bn in stock, while JP Morgan plans $6bn, and Bank of America is to buy back $5bn.

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