The Federal Reserve Board of Governors on Thursday showed that the company has enough capital to withstand a severe global recession after the latest stress test results show that it has the largest bank dividend payments and treasury stock in the country. Announced that temporary buying restrictions may end after June 30th.
A global recession and a four-point increase in US unemployment to a peak of 10.75% could absorb a cumulative loss of $ 474 billion.
The Federal Reserve has imposed restrictions on bank payments during a pandemic to save capital.
“In the past year, the Federal Reserve Board has conducted three stress tests in several different virtual depressions and the banking system,” Randal Quarles, Vice-Chair of Oversight of the Federal Reserve Board, said in a statement. Has confirmed that it is in a strong position to support the ongoing recovery. ” ..
Companies that compare high-quality capital to risk-weighted assets will see their total common share Tier 1 capital adequacy ratio drop from the actual level of 13% in Q4 2020 to the lowest level of 10.6%. Still, it was more than double the minimum requirement, the Fed said.
Stress tests are designed to give a strong shock to a bank and test what happens to the bank’s capital. This year, all banks were individually above the minimum capital level.
Wall Street analysts expect the Fed’s decision to result in much higher dividends and share buybacks.
Critics say financial support from both the Fed and Congress also helped the bank’s health. A senior Federal Reserve Board official said banks could accumulate capital in 2020 with government support. But in last year’s stress test, without that support, banks would have cut capital in 2020, but not at the level of financial instability.
The Federal Reserve Board said it expects banks to wait until 4:30 pm on Monday, June 28, to announce planned capital actions.
The Fed in March said it was ready to end temporary restrictions on dividend payments and share buybacks, subject to the completion of its annual stress test.
Federal Reserve Board stress tests show that large banks can withstand a global recession, pave the way for payments and resume share buybacks
http://www.marketwatch.com/news/story.asp?guid=%7B20C05575-04D4-B545-74D3-D3A5C9A5AEC5%7D&siteid=rss&rss=1 Federal Reserve Board stress tests show that large banks can withstand a global recession, pave the way for payments and resume share buybacks