SMM: the Federal Reserve said on Thursday that it would decide in the next two weeks whether to extend measures to restrict banks from paying dividends and buybacks. The measures were scheduled to expire at the end of the third quarter.
The Fed announced in June that it would limit bank dividends to second-quarter levels and ban all buybacks until the end of the third quarter. The Fed said at the time that an analysis showed that banks faced potential risks if capital allocation continued unabated.
JPMorgan Chase has previously said it could resume share buybacks in the fourth quarter if regulators allow it.
In addition, the Fed released two hypothetical scenarios for Wall Street bank stress tests on Thursday, which will examine the health of banks' balance sheets. It will be the first time in a year that the Fed has conducted two rounds of stress tests on banks. The stress tests will test the performance of banks as unemployment continues to rise.
The two scenarios of this stress test are A: assume that the US unemployment rate reaches 12.5 per cent and GDP shrinks by 3 per cent, while assuming that overseas markets are hit harder. B assumes that the impact is small but lasts for a long time.
Regulators plan to release the stress test results no later than the end of 2020, but did not say whether the results will affect the industry's capital needs. The Fed has previously made it clear that it is reluctant to increase capital requirements in a crisis.
"uncertainty in the economy remains unusually high in the coming quarters, and these two additional tests will provide more information on the resilience of large banks," Fed Vice Chairman Randal Quarles said in a statement.
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