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The Federal Reserve gave the consent to 32 out of the 35 major United States banks for raising the dividends and also buy-back of shares after thoroughly judging the financial foundation of such banks and whether it would be able to withstand the economic downturn. The Federal Reserve also gave its consents for the plans regarding the Morgan Stanley and Wall Street powerhouses Goldman Sachs. This was approved on one condition that the total stock buybacks and dividend payouts would be kept at the current levels.

Federal Reserve also out rightly rejected the capital ideas of the United States Investment Company of Germany’s Deutsche Bank and cited the flaws in the assumption of being able to forecast the losses and revenues. Federal Reserve gave consent to the State Street Corporation on the provision that it would improve their analysis of the imaginary lending risks that are associated with other major banks.

The banks are tested through a yearly check-up for determining whether their present plans regarding the pay-out of capital to its shareholders would even now allow banks to continue lending even if they are hit by a financial emergency and extreme recession. Approval has now been given for paying out the shareholders approximately 95% of the net revenue, which is generated over the coming 4 quarters.

After the outcomes were communicated to the public, many banks announced that they are about to boost their dividends. They also announced that the stock amount, which is planned to be buy-back in this year, would be increased.

Raising the dividends is quite expensive and the regulators do not want the financial institutions to decrease reserves and make themselves vulnerable to another recession. The buybacks help the shareholders as well.