Business

Fed rejects five banks’ capital plans

The Fed objected to Santander’s plan to increase dividends, which would reduce the bank’s capital, and found that Citizens lacked the ability to estimate revenue and losses under severe stress.
The Fed objected to Santander’s plan to increase dividends, which would reduce the bank’s capital, and found that Citizens lacked the ability to estimate revenue and losses under severe stress.David L Ryan/Globe Staff

This is a summary. To read the whole story subscribe to BostonGlobe.com

WASHINGTON — Citigroup and two banks with substantial Massachusetts operations, Santander and RBS Citizens, are facing questions about their ability to ride out another calamity in the financial markets.

The Federal Reserve said Wednesday the banks, plus British giant HSBC and Zions Bank, need to resubmit their proposals to pay out billions of dollars to shareholders because of weaknesses in their capital plans. The other 25 banks subject to the review were given approvals to move ahead with plans to increase their dividend payouts, which analysts have pegged at about $75 billion in total.

In the aftermath of the financial crisis, regulators insisted that banks sock away enough capital — cash, investor equity and other assets — to cushion against losses and stave off future taxpayer bailouts. Congress mandated that regulators give banks an annual checkup and granted the authority to stop banks from paying out capital in the form of dividends, stock buybacks, and other practices.

Full story for BostonGlobe.com subscribers.

Get the full story with unlimited access to BostonGlobe.com.

Just 99 cents for four weeks.

Share