| WASHINGTON, March 26
WASHINGTON, March 26 U.S. banks will tell
shareholders on Wednesday how much they plan to pay out after
the U.S. Federal Reserve unveils whether they can afford the
cost and still be robust enough to weather the next crisis.
It is part of a two-step annual regulatory check-up of the
health of the largest U.S. banks. Last week, the Fed said that
all but one of 30 banks had passed a model run of a simulated
crisis similar to 2007-09 credit meltdown.
The exercise, in which banks had to show how they would cope
with a halving of the stock market, is an increasingly important
benchmark for the Fed to make banks safer and have them rely
less on borrowing to fund their business.
All of the banks except Zions Bancorp stayed above
the five percent threshold for the top-tier capital requirement.
However, that does not automatically mean that the Fed has
approved their shareholder pay-outs.
In its review, the Fed assumed banks would keep dividends at
current levels and not buy back shares, setting off several days
of speculation about whether banks with low capital ratios would
be allowed to increase dividends.
Now, the Fed will say whether it has given its blessing to
the banks' actual capital return plans. The process is spread
over a week to give banks a few days to adjust their plans if
the Fed doesn't approve them.
Last year, regulators directed JPMorgan Chase and
Goldman Sachs to redo their proposals due to concerns
about their capital planning processes.
The results are of key importance for investors in a bank
such as Morgan Stanley, which has been paying only a
nominal dividend since the financial crisis, and has not had a
meaningful stock buy-back since 2006.
Several firms appeared to disagree with the Fed's scores
last week. Bank of America and Wells Fargo
released results of their own tests showing that they performed
better than under the Fed's tests.
European regulators plan to conduct their own stress tests
later this year, following a broad review of the asset quality
of banks, and just as Brussels is endowing the European Central
Bank with far greater oversight powers.
(Reporting by Douwe Miedema; Editing by Diane Craft)