WASHINGTON (AP) - Bank of America must revise its plans for increasing dividends or buying back its own stock, the Federal Reserve has ordered, citing gaps in the bank's risk planning.
The Fed announced the decision Wednesday as part of its "stress tests" - an annual check-up of the nation's biggest financial institutions. This year, 31 banks were tested to determine if they have large enough capital buffers to keep lending through another financial crisis and severe economic downturn.
The central bank is also barring U.S. divisions of two European banks from paying any dividends, saying their planning for financial risks is inadequate. Those divisions belong to Germany's Deutsche Bank and Spain's Santander.
The remaining 28 banks can raise dividends or buy back shares.
Bank of America, the second-largest U.S. bank, has until Sept. 30 to submit a revised capital plan. If the new plan is acceptable to the Fed, the bank will be able to pay higher dividends to investors or buy back shares. If not, it will be barred from doing so but will be able to maintain its dividend at current levels.
In the stress tests in 2013, JPMorgan Chase & Co. and Goldman Sachs were required by the Fed to revise their capital plans.
This year, Wall Street powerhouses JPMorgan, Goldman and Morgan Stanley revised their capital plans to reduce their dividend payouts or share repurchases late last week after the initial results of the stress tests.