Fed: Banks must pass stress test to raise dividends
Federal Reserve Governor Daniel Tarullo said this morning that banks seeking to increase dividends will be required to undergo a stress test showing they would have sufficient capital for two years. Concerns that bank capital was under pressure from souring loans prompted Fed officials in February 2009 to issue a letter to the organization’s regional supervisors telling them banks “should reduce or eliminate dividends” when earnings decline or the economic outlook deteriorates. The Fed will “soon” be issuing the guidelines for the first quarter of next year, Tarullo said.
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