Posted on 20 Dec. 2020 at 5:00 p.m.Updated 20 Dec. 2020 at 18:20
American banks will be able to resume share buybacks for the first quarter of 2021, more than six months after their freeze. So decided the Federal Reserve of the United States Friday after carrying out new stress tests on thirty-three of the most important players in the sector. “The big banks could continue to lend to households and businesses even in the event of a severe downturn in the economic situation”, observes Randal Quarles, vice-president of the Fed, in charge of the supervision of the tests. “The Governing Council will continue to assess their resilience and monitor economic conditions”, adds the institution in a press release.
All the restrictions taken last June have therefore not been lifted, on the contrary. Those related to bank dividend payments are extended until the end of March 2021. “For the first quarter of 2021, dividends and share buybacks will be limited to an amount based on the income of the past year”, indicates the central bank. “If a company has no income, it will not be able to pay dividends or carry out share buybacks”, she adds. Specifically, banks will be able to distribute liquidity to shareholders as long as these amounts are not greater than the average profit of a bank in the last four quarters.