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Regulators Warn Banks Not to Hike Dividends: Report

CNBC.com
Wednesday, 10 Mar 2010 | 6:24 AM ET

Regulators have told US banks to avoid increasing dividends or share buyback programs until the economy is on firmer footing, the Financial Times reported Wednesday.

AP

Shareholders argue that companies now faring well after the worst of the crisis appears over -- such as Goldman Sachs or JPMorgan Chase -- should have the chance to return capital to shareholders, the FT said.

But regulators are "gun shy," fearing that allowing healthier banks to return cash to investors would lead to demands from weaker institutions, a senior Wall Street executive told the paper.

A December letter from officials warned banks they would face stress testing of balance sheets before being able to release funds to shareholders, but some bank executives are optimistic the stance may shift soon, the FT reported.

Still, industry watchers argue than sustained improvement won't be enough until Congress and international groups create new rules on capital buffers, the paper said.

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