Banks clear Fed stress test, paving way to boost buybacks, dividends

The results will be met by a sigh of relief on Wall Street, where firms had been limited on what they can pay out to investors. Analysts expect banks like JPMorgan Chase, Bank of America and Goldman Sachs will be able to pay out more than US$100 billion together over the next four quarters.

WASHINGTON: Large banks will no longer face pandemic-era restrictions on how much they can spend buying back stock and paying dividends, the Federal Reserve announced Thursday after finding the firms would remain well capitalized in its latest stress test.

The central bank said the test found 23 of the largest firms would suffer a combined US$474 billion in losses under a hypothetical severe downturn, but that would still leave them with more than twice as much capital required under Fed rules. As a result, the Fed will lift limits on buybacks and dividends it had put in place at the onset of the coronavirus pandemic.