The Federal Reserve signed off on capital plans for 25 banks Wednesday, but rejected five others.
The central bank said it cast aside plans offered by Citigroup, HSBC, RBS Citizens and Santander Holdings based on “qualitative concerns.” A fifth bank, Zions Bancorp, saw its plan rejected because it failed to meet minimum capital standards after being subjected to a stress test.
Those banks that failed to gain Fed approval are not permitted to dole out dividends, stock buybacks or other shareholder rewards without written approval from the Fed.
The Fed told Citi it needed to rework its capital plan because, as one of the nation’s largest and most complex banks, it faced “significantly heightened supervisory expectations.” While the bank has improved its risk management in recent years, the Fed determined the bank had to do more to prepare for a potential downturn, and needed to improve its plans in several areas deemed deficient.
HSBC, RBS Citizens and Santander were rejected because their plans were deemed insufficient. All three banks are new to this review process this year, and while new entries are subjected to less rigorous analysis, the Fed determined their plans needed improvement, citing deficiencies in several key areas.
Zions’s capital plan was rejected on quantitative grounds. The Utah bank was the only bank that failed to pass the Fed’s “stress test” of a harsh economic and financial downturn. The central bank released the results of that test, another annual event, earlier this month.
Goldman Sachs and Bank of America only received Fed approval for their capital plans after reworking their proposals and resubmitting them to the Fed.
The 30 banks required to submit plans this year hold 80 percent of all assets held by U.S. banks.