JPMorgan (JPM), Goldman Sachs Inc (GS) Capital Plans Gets Fed Approval

JPMorgan Chase

Goldman Sachs Group Inc (NYSE:GS) and JPMorgan Chase & Co (NYSE:JPM) got their capital plans passed by the U.S. Federal Reserve after being told to improve on certain aspects in their capital planning process.

“We are pleased that the Fed determined that our CCAR process improvements met their expectations,” JPMorgan’s chief executive, Jamie Dimon, said in a statement on Monday.

Banks to continue share buyback

Earlier, the banks presented their capital plans under the stress test system to evaluate how the banks would cope during any financial meltdown.

Back in March, the regulators objected the decision of Federal Reserve, who said that both the banks can move forward with their plans to buy back shares and pay dividends. According to regulators, the comprehensive capital analysis and review of both the banks reveal that they do not have an adequate process to decide the capital payouts to shareholders. JP Morgan and Goldman Sachs Group Inc (NYSE:GS) were suggested to make a new plan and submit it by the end of the third quarter.

JP Morgan appointed around 5000 people to enhance its business controls and processes, including monitoring risk and guarding against money laundering.
Goldman said that Federal Reserve has not objected to its new plan.

Qualitative concerns

Fed allowed Goldman Sachs Group Inc (NYSE:GS) and JPMorgan Chase & Co (NYSE:JPM) to continue with their capital distribution plan, but were chastised based on their qualitative concerns rather than capital ratios.

In March, JP Morgan informed that its buy back of $6 billion was approved, and was also allowed to increase its quarterly dividend by 8 cents, to 38 cents per share. Goldman stated that it spent $4.77 billion during the first nine months of 2013 to repurchase 30.8 million shares, and increased its dividend by 5 cents, to 55 cents per share.

BB&T and Ally got approved earlier

All the major United State banks were subjected to this test after the fall of colossal financial institutions in 2007-2009 meltdowns. Banks are required to submit a capital distribution plan to Federal Reserve, who is authorized to disapprove the plans if it finds that buying shares or paying dividends will threaten the bank’s financial stability.

Last year, Fed disapproved plans of Ally financials and BB&T. However, later their plans got approved by the Fed. Ally was allowed to buy back shares worth $5.9 billion in preferred stock from the U.S. treasury.

Results of the new stress test initiated by Federal Reserve will come out in March.