Planned US capital buffer endangers shareholder payouts

CCAR-based stress capital buffer would hit healthiest banks harder than weaker rivals

US Federal Reserve, Washington, DC
US Federal Reserve, Washington, DC

The Federal Reserve is working on amending a new capital rule it proposed last year, after accepting it “could benefit from further refinement”. What it has been quiet about is the fact the new stress capital buffer (SCB) as it stands would have the perverse effect of penalising banks for success and therefore requires fundamental changes.

A quirk in the Fed’s definition of retained earnings could prevent the most profitable US banks – usually generous with dividends and share buybacks – from

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