(Adds detail from release)
WASHINGTON, June 12 The U.S. Federal Reserve on
Thursday proposed tougher conditions for banks to pay dividends
or buy back shares as part of a number of changes to its annual
stress tests to measure banks' ability to withstand financial
Banks need to ask the Fed for approval for shareholder
payouts each year, part of a set of new rules to make banking
safer after the financial crisis.
Banks must submit capital plans that disclose whether they
intend to pay dividends or buyback shares, as well as any
planned increases in capital through raising new debt or shares.
The new rule would prevent banks from increasing dividends
or buying back shares if they did not meet the capital increases
that they had pledged to the Fed.
"Some large bank holding companies included issuances of
capital instruments in their capital plans, but did not execute
these planned issuances," the Fed said.
For instance, if a bank had planned a $50 million stock
issuance, and combined dividends and stock repurchases of $100
million, but it only raised $25 million in new shares, it would
have to reduce the shareholder payout by $25 million, the Fed
said in its proposed rule.
The central bank also shifted the dates by which banks have
to submit their capital plans.
The biggest banks with more than $50 billion of total assets
would need to submit their plans by April 5, three months later
than under the current rule makings.
The industry has until Aug. 11 to comment on the proposed
rule which would then come into force in the 2015-2016 stress
test cycles, the Fed said.
(Reporting by Douwe Miedema; Editing by Cynthia Osterman and