NEW YORK - The Federal Reserve is preparing guidelines that will determine which banks can begin to pay dividends, increase their dividends or buy back stock. The plan will be released at the end of this month said an unidentified source. The Bank's capital ratio's came under pressure in 2008 and the Federal Government acted by announcing the largest bailout package in U.S. history. Because of this tremendous action, it would have been unconscionable for banks to have paid dividends during the last two years. But times have changed and as the banks are returning to health questions regarding their dividends will be asked. Wall Street was boosted as guidelines for dividends may show the Fed has restored confidence in the banks.
America's strongest banks, Wells Fargo, JP Morgan and PNC Financial state a dividend increase is one of their top priorities. Some banks may not be able to raise their dividends because of higher capital requirements provided by Basel Regulations. But these regulations make little sense, which require the banks to hold an astounding amount of capital which will hurt the nations growth. Currently Royal Bank of Canada largely regarded as a bank who best survived the crisis, would not be able to pay dividends under the new Basel Regulation as their common equity ratio is 4.5%.
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