The Fed has barred the 34 largest banks from share buybacks in Q3
- And has also capped dividend payments at Q2 levels
The Fed says it is capping dividends following Covid-19 sensitivity analysis to ‘ensure large banks remain resilient despite the economic uncertainty’
The suspension of stock buybacks and capping dividends to shareholders is to help ensure the banks have enough loss-absorbing capital to keep lending during the pandemic. In addition, the Fed is requiring all 34 big banks that participated in the stress tests to resubmit their capital plans due to the economic outlook being so uncertain. In previous years, that’s only been required for banks that didn’t pass the tests – its all of them this time around.