US Fed mulls extending bank dividend, share buyback curbs

The US Federal Reserve is studying whether to extend restrictions on dividends and share buybacks.

The Fed will announce within the next two weeks whether those measures to preserve capital will be extended into the fourth quarter, the US central bank said in a statement.

Last June, the US central bank had imposed restrictions banning banks from share buybacks and capping their dividends for the third quarter, to preserve their capital levels amid the coronavirus pandemic.

Meanwhile, the central bank disclosed its deliberations as it laid out details of a new round of stress tests, in which the Fed will analyse the ability of lenders to withstand two scenarios.

The first has the jobless rate peaking at 12.5%, while the gross domestic product (GDP) will also contract 3% amid sharp global economic slowdown.

The second scenario is less severe but longer-lasting.