Fed puts restrictions on bank dividends after test finds some banks could be stressed in pandemic
- The Federal Reserve put new restrictions on the U.S. banking industry Thursday after its annual stress test found that several banks could get uncomfortably close to minimum capital levels in scenarios tied to the coronavirus pandemic.
- The Fed said in a release that big banks will be required to suspend share buybacks and cap dividend payments at their current level for the third quarter of this year. The regulator also said that it would only allow dividends to be paid based on a formula tied to a bank’s recent earnings.
- A recovery in 2021 also will be weaker, with global growth forecast at 5.4% for the year compared to 5.8% in the April forecast. The Fund said, however, that a major new outbreak in 2021 could shrink the year’s growth to a barely perceptible 0.5%.