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Fed Lifting Limits on Bank Dividends and Share Repurchases

Move to take effect for most firms after June 30, following completion of latest round of stress tests.
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The Federal Reserve said after the bell Thursday that it plans to lift restrictions on bank dividends and share buybacks for most firms after June 30.

The temporary restrictions, imposed as the coronavirus pandemic forced economic shutdowns, limited banks’ ability to raise their dividends and execute share buyback plans.

However, with the economy gathering steam and unemployment claims continuing to fall, the Fed said it would lift the restrictions on banks with capital levels above those required by the stress tests currently underway. The Fed’s stress tests examine major banks’ balance sheets and their ability to withstand unusual financial events, including sharp market drops and abrupt housing price declines.  

"The banking system continues to be a source of strength and returning to our normal framework after this year's stress test will preserve that strength," Vice Chair for Supervision Randal K. Quarles said.

Shares of major banks rose in after-hours trading Thursday after logging gains in the regular session ahead of the Fed’s announcement.

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In after-hours action Citigroup  (C) - Get Citigroup Inc. Report rose 75 cents, or 1%, to $72.47; JPMorgan Chase  (JPM) - Get JPMorgan Chase & Co. Report rose $1.09, or 0.7%, to $154.64; Bank of America Corp.  (BAC) - Get Bank of America Corp Report gained 33 cents, or 0.9%, to $37.99, and Wells Fargo  (WFC) - Get Wells Fargo & Company Report rose 31 cents, or 0.8%, to $39.61.

Rebounding interest rates have fueled optimism for banks in recent weeks on expectations bank lending businesses can begin to make more money on the differences between long-term and short-term rates. The Financial Select Spider Fund  (XLF) - Get Financial Select Sector SPDR Report, is up almost 13% so far this year.

Stocks shook off losses and finished higher Thursday as investors weighed encouraging economic data and assessed progress in the fight against COVID-19.

President Joe Biden said Thursday he doubled his vaccination goal to 200 million shots in his first 100 days in office.

The Dow Jones Industrial Average finished up 199 points, or 0.62%, at 32,619, the S&P 500 rose 0.52% and the tech-heavy Nasdaq ticked up 0.12%.

Nike  (NKE) - Get NIKE, Inc. Class B Report declined 3.4% Thursday after the world's biggest sports apparel group was criticized by China's Foreign Ministry for a statement it made about the country's treatment of Uighur Muslims.