US Banks Willing to Evoke Dividends
Wednesday, January 19, 2022 5:18 PM

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Several banks have made submissions to the Federal Reserve about their capital plans for resuming dividends or buying back their own stock.

The great recession of mid 2008 has terribly hit the global economy. The banking sector in US has undergone a drastic change over the period of time. In recent times, investors are putting a keen eye on the dividend paying companies. Before the financial crises, various major banks in US were reliable sources for dividends. But there is a substantial reduction and cut offs in the dividend payments by most of the banks by mid 2009.

Banks failed to repay the bail out money received by them under the Troubled Assets Relief Program from the US treasury department. As a result, they were not allowed to increase their dividends. However, several banks have made submissions to the Federal Reserve about their capital plans for resuming dividends or buying back their own stock. Guidelines were issued by the Fed for issuing dividends if the required payments have been made by the banks and they meet capital requirements for the proposal.

Banks willing to increase dividends have to adhere to the new set of capital standards known as Basel III, which suggests that bank will be only be allowed to pay or increase the dividends only if it maintains a Tier 1 capital ratio of 12% and operating in a firm environment. The Fed also explained that banks which have not yet repaid the amount of the government bailout under TARP do not qualify for making or increasing dividend payments. This indisposes many regional banks, which have struggled to return  to the profitability. 

 

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