Fed Sets 'Stress Test' Deadline for Biggest Banks
Nov 17th 2010 6:45PM
Updated Nov 17th 2010 6:57PM
The Federal Reserve has set a Jan. 7 deadline for the largest banks to prove they have the capital to withstand another financial crisis. Bank of America (BAC), JPMorgan Chase (JPM) and Citibank (C) are among the 19 largest U.S. banks that will have to file so-called "stress test" documentation to show how they would withstand another recession, the U.S. central bank said Wednesday.
New plans must be filed whether the banks plan to issue dividends or not. The Fed already conducted stress tests for banks last year, and stricter international banking regulations pushing banks to retain more capital -- and to take less risk -- have kept dividends conservative.
Bank shares of banks rose earlier this month after The Wall Street Journal reported that the Fed might start outlining financial benchmarks that would allow better-capitalized banks to boost dividends. JPMorgan Chase and others have indicated that they want to increase dividends.
But bank stocks fell on Wednesday's news. By about 3:15 p.m. Eastern time, Bank of America shares had declined 2.3%, JPMorgan shares slid 1.2% and Citigroup shares slipped 1.3%.