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US Fed issues new capital action rules

Thursday 18 November 2010 - by Will Henley

New guidelines for evaluating proposals by large bank holding companies to increase dividend payments or repurchase or redeem stock have been released by the US Federal Reserve.

The new guidelines for 2011 put forward criteria covering a firm's ability to absorb losses over two years under different scenarios, expectations on new Basel III capital requirements, and where institutions plan to repay US government investments.

In a statement, the Federal Reserve said: "The criteria provide a common, conservative approach to ensure that BHCs hold adequate capital to maintain ready access to funding, continue operations, and continue to serve as credit intermediaries, even under adverse conditions."

The authority is requesting that large bank holding companies based in the US submit comprehensive capital plans by early next year "regardless of whether a capital action is planned".



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