Key Points
- Fed puts restrictions on bank dividends after test finds some banks could be stressed in pandemic 2
The Fed’s annual stress test of the major banks shows some banks could get close to minimum capital levels in scenarios related to the coronavirus pandemic. Because of this, banks must suspend share repurchase programs and keep dividend payments at current levels for the third quarter. 1
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. 2
The outlook for a global economic recovery over the past month has worsened or at best stayed about the same, according to a firm majority of economists in Reuters polls, with the ongoing recession expected to be deeper than predicted only last month. 3
“Even with recent bright signs, the initial drop is much deeper than post-2008. While tens of millions of new jobs will likely be created between now and year-end, a quicker jobs recovery is not a V,” noted Ajay Rajadhyaksha, head of macro research at Barclays. 3
Government experts believe more than 20 million Americans could have contracted the coronavirus, 10 times more than official counts, indicating many people without symptoms have or have had the disease, senior officials said. [4][4]