The U.S. Federal Reserve is preparing to end on June 30 the pandemic restrictions on banks that prevented them from making dividend payments and buying back their own stock.
The Federal Reserve said that large U.S. banks that successfully pass the next round of stress tests with sufficient capital will have restrictions lifted at the end of June, bringing an end to pandemic-era restrictions that had dragged down financial stocks for much of last year.
Major banks include the four largest in the United States — JPMorgan Chase (NYSE:JPM), Bank of America (NYSE:BAC), Citigroup (NYSE:C)and Wells Fargo (NYSE:WFC). Stocks of those banks rose in after-hours trading Thursday on the news that the restrictions will be removed in coming months.
The Federal Reserve had barred large financial institutions from raising dividends during the global pandemic, forcing them to stockpile capital as COVID-19 took a toll on the global economy.
Shares of bank stocks have been rising in recent months on anticipation that the restrictions will be eased. The Federal Reserve relaxed some restriction on stock buybacks last December, allowing banks to resume the popular practice.
And, last week, the central bank ended a significant break on capital requirements for Wall Street firms, citing about $200 billion in excess capital at the largest U.S. lenders. Analysts took it as a sign that the Federal Reserve would soon end its restriction on dividend payments.