For banks that pass this year’s stress tests, the Federal Reserve said it will eliminate the restrictions on dividends and share buybacks while subjecting those institutions instead to the stress capital buffer.
Federal Reserve Chair Jerome Powell said the central bank will consider the pace of coronavirus vaccinations and other factors to determine if restrictions on dividends and share repurchases will continue.
The Federal Reserve's “mid-cycle” assessment — conducted in light of the uncertainty posed by COVID-19 — showed that several banks would maintain just the bare minimum level of capital under hypothetical scenarios.
As with most things related to 2020, COVID-19 will be a deciding factor as the Federal Reserve considers whether banks are able to increase their dividends or resume share buybacks.
The central bank issued a proposal aligning recent stress testing changes with supervisory standards that are tailored to an institution's size and complexity.
