Bank of America must resubmit its plans to raise dividends or buy back stock, the Federal Reserve has ordered, citing weaknesses in the bank’s planning processes.
The Fed announced the decision Wednesday as part of its “stress tests” — an annual checkup of the nation’s biggest financial institutions. This year, 31 banks were tested to determine whether they have large enough capital buffers to keep lending through another financial crisis and severe economic downturn.
The central bank also is barring U.S. divisions of two European banks from paying any dividends, saying their planning for financial risks is inadequate. Those divisions belong to Germany’s Deutsche Bank and Spain’s Santander.
The remaining 28 banks can raise dividends or buy back shares. They included JPMorgan, Citigroup and Wells Fargo & Co., which, with Bank of America, are the four biggest U.S. banks by assets.
Shortly after the Fed announced its results Wednesday, a handful of banks began increasing their dividends, including JPMorgan Chase and Wells Fargo.
Bank of America, the second-largest U.S. bank, has until Sept. 30 to resubmit its capital plan. If the new plan for its financial management processes isn’t acceptable to the Fed, the regulators said they may restrict dividend increases or share buybacks.
