Fed Releases Results of Bank Stress Tests

By ERIC DASH
NYT
2:07 p.m. | Updated

The Federal Reserve is relaxing its hold on some of the nation’s biggest banks – permitting them on Friday to raise dividends or buy back shares for the first time since the financial crisis struck in the fall of 2008.

The Fed notified financial institutions that passed a second round of stress tests that they can begin returning money to their shareholders, an important sign of the banking system’s speedy recovery. Regulators had largely restricted such efforts, urging banks instead to slash their dividends and take other actions to conserve their capital as financial conditions worsened.

Banks are expected to review the Fed’s findings with their boards and some are already putting out a flurry of announcements detailing their plans. Regulators plan to limit dividend payouts to 30 percent or less of anticipated earnings for the remainder of 2011, and expect the banks to continue increasing their capital base.

As a result, most of the banks are phasing-in the dividend increases over the coming quarters, instead of announcing a sharp increase.

(More here.)