Finally, 34 firms have attained approval by the Federal Reserve for capital return plans. This is the first time that all the 'stress tested' banks passed the Fed's requirements. What does this mean?
Big U.S. banks won approval from the Federal Reserve on Wednesday to return money to shareholders, suggesting regulators believe they are healthy enough to stop stockpiling capital--and, in some cases, start giving it back to investors.
In reality, we don't really know exactly what this means for the future of financial institutions, however, we can start assuming that this marks a turning point from the pre-crisis days in terms of bank reliability. Many banks are looking to pay out more than they earn over the next year.
"I'm pleased that the [stress-test] process has motivated all of the largest banks to achieve healthy capital levels and most to substantially improve their capital planning processes," Fed governor Jerome Powell said in a statement Wednesday.
The largest firms, however, "continue to fall short of supervisory expectations" in a few areas, including maintaining accurate data and identifying risks in new products or underwriting standards, the Fed's report said.
Regardless, the banks' efforts seem to have paid off. They are better capitalized and managed than before the financial crisis.
What do you all think this really means? Are bank stocks going to rise? Do you think this level of Federal Reserve inquiry is good enough?
I'm also curious as to how that will affect us. Will this have any significant effect on people working at banks or will this be felt solely by the shareholders?
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