Fed: JPMorgan, Goldman need better capital plans

NEW YORK — JPMorgan Chase and Goldman Sachs need better plans for coping with a severe recession, the Federal Reserve said Thurs­day, giving the banks until September to revise them.


The announcement came as part of the Fed’s “stress tests,” its annual checkup of 18 of the country’s big banks. The government runs the tests to see how the banks would fare in a severe recession. After getting the test results, it tells each bank whether it’s allowed to raise its dividend or buy back more of its shares.

The Fed said JPMor­gan and Goldman were allowed to start any dividend increases or share buybacks they have asked for. That privilege would be withdrawn only if they didn’t submit new capital plans that satisfy the Fed.

Ally Financial and BB&T Corp. fared worse: The Fed forbade them from going through with any dividend increases and share buybacks.

Overall, the Fed approved requests outright from 14 of the 18 banks it was examining, including Citigroup, Wells Fargo, Morgan Stanley and Bank of America.

The Fed didn’t specify what each bank had asked for: dividend increases, share buybacks or both. Citigroup and Bank of America both said they got permission to buy back shares, but didn’t ask to raise their dividends. Both pay a quarterly dividend of a penny, or 4 cents a year.

The stress tests assumed the banks would raise dividends and share buybacks as requested. Those measures can deplete the financial cushions banks need in emergencies. To “pass” the tests, the banks needed to post a capital ratio of at least 5 percent in those projected scenarios.



Fri, 01/19/2018 - 21:23

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