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 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.
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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)
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