WASHINGTON, March 25 (Xinhua) — The U.S. Federal Reserve announced on Thursday that the temporary and additional restrictions on dividends and share repurchases for most U.S. banks will end after June 30 following the completion of the current round of stress tests.
“Firms with capital levels above those required by the stress test will no longer be subject to the additional restrictions as of that date. Firms with capital levels below those required by the stress test will remain subject to the restrictions,” the Fed said in a statement.
The Fed in February released the hypothetical scenarios for its stress tests this year that will apply to the country’s largest 19 banks, and results for the stress tests will be released by July 1.
For a bank that is not subject to the stress tests this year and on a two-year cycle, the additional restrictions will also end after June 30, according to the Fed.
Since 2009, the Fed has used the annual stress tests to measure large U.S. banks’ ability to respond to severe economic and market turbulence. If a bank’s capital is found to be inadequate, the central bank can block it from buying bank shares or paying dividends.
After last year’s stress tests, the Fed said large banks had strong capital levels under hypothetical scenarios with severe global recessions, while placing additional restrictions on bank payouts to preserve the strength of the banking sector.
“The banking system continues to be a source of strength and returning to our normal framework after this year’s stress test will preserve that strength,” Fed Vice Chair for Supervision Randal Quarles said in a statement. Enditem