Banks’ Billions in Payouts Hinge on Fed’s View of the Pandemic
- Friday’s stress test to determine fate of buybacks, dividends
- Economy, pandemic make predicting outcome a ‘fool’s errand’
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As with most things related to 2020, Covid-19 will be a deciding factor as the Federal Reserve considers whether banks are able to increase their dividends or resume share buybacks.
The central bank releases results of its second round of stress tests at the end of the week. It scheduled the review to better understand the potential long-term effects of the pandemic on banks’ finances after coming up with a temporary formula earlier this year to determine its payout policy, which included a suspension of share buybacks. Two banks had to also curtail dividends as a result of those rule changes.