Daily ArchiveOctober 2, 2017

Big Banks Set to Pay Out Largest Dividends in a Decade

Big Banks Set to Pay Out Largest Dividends in a Decade

Big Banks Set to Pay Out Largest Dividends in a Decade

All major banks in the country have passed the last stress test on Wednesday, the first time the review has taken place since the Federal Reserve began managing seven years ago.

Approval results show that the US banking system has rebuilt enough its capital levels since the catastrophic losses of the 2008 financial crisis while learning to effectively plan another financial disaster.

The test also opens the way for banks to pay the largest dividends in nearly a decade, a favor for shareholders who have suffered years of sagging statements.

Banks have the opportunity to bring up to 100% of their earnings to shareholders, up from 65% last year.

Such lavish payments are exactly what investors expected the banks to hand over chaired by Trump. Although the administration has no direct role in the stress test, this year it is the first governor of a Republican Republic, Jerome H. Powell, to oversee the process.

M. Powell, the former head of private equity, said he would eliminate the qualitative test for some banks.

The industry has complained that this process is too subjective.

This year, only 13 of the 34 banks that participated in the stress test had to undergo a qualitative review.

Previously, banks that had crossed some sort of scandal leading to the test seemed to fail often – like Citigroup, which did not pass the test in 2014 after the costly problems in its Mexican unit.

One theory is that the Fed could fail at least one bank each year to keep the industry on its toes.

But this year, the Fed did not give an example. Even Wells Fargo, who was involved in a major scandal in creating more than two million unauthorized bank accounts and credit cards, passed the Wednesday stress test without any objection from the Fed.

European banks have also received good news. Santander Holdings USA, the US unit of the Spanish banking giant, has had three consecutive years.

Deutsche Bank, which also had difficulties in previous resistance tests, was also successful.