Handful of US banks have passed stress tests – Federal Reserve



US Fed - Taking Stock of the Country's Biggest Banks' Health

US Fed – Taking Stock of the Country’s Biggest Banks’ Health

The US Federal Reserve has announced that some of the country’s largest 19 banks have passed the latest round of stress tests.

Capitalising on the moment, JP Morgan Chase and Wells Fargo immediately said they will boost their dividend payouts.

The Fed announced that ‘some’ of the banks will allowed to buy-back shares, boost dividends and repay government money. However, it did not reveal the name of the banks that have passed or failed the test.

JP Morgan raised its dividend payout to 25 cents from the earlier announced 5 cents. The board also approved share-buy-backs worth $15 billion.

US Bancorp and BNY Mellon also announced their plans of hiking dividend for the year.

In a statement issued on Friday, the US central bank said: “The return of capital to shareholders under appropriate conditions is a step in the process of improvement in the financial sector and will help to promote banks’ long-term access to capital”.

Some of the biggest names in banking became history during the financial crisis in 2008 and 2009. Data released by US Federal Deposit Insurance Corporation (FDIC) shows 140 and 157 banks failed in 2009 and 2010 respectively. The trend is yet to stop and 25 banks in the US have collapsed so far this year.

The Fed has started intimating banks about their performance in the second round tests, including Citigroup, Goldman Sachs and Bank of America.  However, it said it will leave it to the individual banks to decide whether they wish to inform the shareholders.

Banks passing the test can deploy their excess capital cushion the way they want.

“All 19 firms will receive more detailed assessments of their capital planning processes next month”, the Federal Reserve announced on Friday.

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