Fed explains guidelines for banks' dividend increases

11/18/2010 | Bloomberg · Bloomberg

The Federal Reserve has outlined how it will determine which major financial institutions are allowed to increase dividends and repurchase shares. The Fed's guidelines require banks to undergo stress tests and maintain a Tier 1 common equity ratio of at least 5% after a distribution. The Fed also said that lenders must demonstrate how they will meet the Basel III capital rules and show that they will be able to absorb losses if the economy deteriorates. Meanwhile, Standard & Poor's said major banks might face resistance from the central bank on increasing their dividends.

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