Could Banks Soon Start Raising Their Dividends?
Nov 4th 2010 6:15PM
Updated Nov 5th 2010 7:37AM
The Federal Reserve may start letting banks with high levels of capital boost their dividends, anonymous sources told The Wall Street Journal. If that happens, it will signal that regulators have become comfortable enough with the new financial regulations to let institutions hike shareholder payouts. Shares of U.S. banks advanced Thursday on the news.
The Fed will soon outline dividend allowances based on banks' capital reserves, the Journal reported Thursday. Banks such as JPMorgan Chase (JPM) have said they've wanted to boost dividends.
Banks have had to take a conservative approach to dividends while regulators outlined new international banking regulations -- called the Basel III rules -- designed to reduce the chances of another financial meltdown in the future. The regulations, finalized in September, are meant to ensure that financial institutions are better capitalized and less likely to take on risky investments.
JPMorgan Chase shares rose 5.5% to close at $39.80 on Thursday. Bank of America (BAC) shares advanced 5.3% to $12.13, while Wells Fargo (WFC) shares rose 3.8% to $27.46.