The Fed recently rejected Bank of America’s plan to repay shareholders dividends, according to the New York Times.
When banks begin paying dividends to shareholders again, it will signal strength in the financial services sector.
Stress tests results on Friday suggested that many banks have bounced back from the financial crisis and are ready to pay dividends and buy back stock. So banks including JPMorgan, Wells Fargo, and Citigroup all filed to do so.
But Bank of America’s plans, to repay shareholders just one cent per share, were stopped in their tracks by the Fed.
Apparently the firm didn’t test as well as the others on some measure relating to recovery from the crisis, because the Fed rejected its plans to pay dividends. It might not have as much capital as its counterparts.
The firm says it will try again for the second half of 2011.
The stock is off nearly 3%.