Share buybacks are allowed again in the first quarter, as the Fed announced on Friday after the US market closed. However, this only applies on condition that the distributions are offset by corresponding profits.
The Fed Vice President Randal Quarles, responsible for banking supervision, gave the 33 largest financial institutions a good rating overall. The banking system had been “a source of strength” this year and the stress tests of the central bank had confirmed that the financial institutions would still be able to maintain lending to households and companies even in a bad crisis scenario.
However, strict conditions still apply to dividends – increases above the level of the second quarter of this year remain taboo for big banks. In June, the Fed imposed far-reaching restrictions on the financial corporations so that they could keep their cash reserves together in the Corona crisis. Thanks to these regulations, the banks have managed to set aside around $ 100 billion in capital buffers, the Fed said.
The largest US financial house JPMorgan ChaseCo announced immediately after the announcement of the results of the bank stress test, multi-billion dollar share buybacks. The financial group is launching a $ 30 billion share buyback program that is scheduled to begin in the first quarter. The large US investment bank Goldman Sachs did not wait long and announced almost immediately after the Fed announcement that it would continue its share buybacks in the first quarter.
The shares of both banks, as well as the stocks of the other major financial institutions, increased significantly in after-hours US trading.