Fed bars shareholder payout plans from Citi, 4 other banks

[Newsjock]

Source: Reuters

The U.S. Federal Reserve on Wednesday rejected Citigroup's planned payout to shareholders because of shortcomings found in its annual check-up of the financial health of the country's biggest banks, the second time Citi was dealt a blow in the so-called stress tests.

Citi was among five banks that the Federal Reserve blocked from going through with planned payouts because of results from the stress tests.

The Fed also blocked plans for higher dividends or share buybacks submitted by the U.S. units of HSBC, RBS and Santander due to weaknesses in their capital planning processes. Zions Bancorp's was the fifth bank whose plan were barred, though this was expected because Zions last week was the only bank to miss minimum hurdles for regulatory capital in a first tranche of the stress tests, which simulate a future crisis as severe as the 2007-09 credit meltdown.

... The five banks will not be allowed to move forward with proposed raises in dividends and share buybacks, though they can continue with shareholder payouts at the same pace as they did last year.

Read more: http://www.reuters.com/article/2014/03/26/usa-banks-capital-idUSL1N0MN18420140326

[cui bono]

1. k n r to read later...

[DiverDave]

2. So its OK to give huge boneses

to the people that caused the theft, but BAD to pay dividends to regular folks (read peons), got it.

[Jesus Malverde]

3. Citigroup Fails Federal Reserve’s Stress Test for 2nd Time in 3 Years

The Federal Reserve dealt an embarrassing blow to Citigroup on Wednesday, attacking the bank’s financial projections for its sprawling operations and denying the bank’s plan to increase dividends and repurchase stock.

In a report, the Fed rejected Citigroup’s plans to manage its capital, citing concerns about the “overall reliability of Citigroup’s capital planning process.” It was the only one of the nation’s top five banks that failed to persuade the Fed to bless its plans for shareholder payouts.

The Fed did not give many details behind its rejection, which was the second denial of Citigroup’s capital plan in the past three years. But analysts and investors said the message from the regulator was clear.

“The Fed is saying that the bank’s financial processes are not where they should be, and this is five years after the crisis,” said Mike Mayo, the CLSA banking analyst. “It is not as though they haven’t had time to clean up their act.”

The Fed’s rejection of Citigroup was particularly striking not only because most of its large peers, like JPMorgan Chase and Bank of America, had their plans accepted, but also because Citigroup’s capital cushion — a key measure of a bank’s strength — comfortably exceeded the regulatory minimum.

http://dealbook.nytimes.com/2014/03/26/fed-rebuffs-citigroup-on-capital-plans/