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Federal Reserve, U.S. Banks Clashed Over Two-Day Release Schedule for 'Stress Test' Results - Sources
By Dow Jones Business News, March 05, 2013, 03:31:00 PM EDT
By Shayndi Raice, Michael Crittenden and Dan Fitzpatrick
Large U.S. banks and the Federal Reserve have clashed over the two-part "stress test" release schedule adopted this year, in the latest flash point between large financial institutions and their overseers.
A conference call last week between Fed officers and bank representatives ended with the central bank refusing to accommodate demands from some lenders for a one-day release of results, according to a person briefed on the call.
The first component of the release, data on how 18 large U.S. banks will fare in an economic downturn, is slated for after U.S. stock markets close on Thursday. The second part, the Fed's response to buyback-and-dividend requests, is scheduled for publication a week later.
Some executives warn that the delay could boost volatility in bank shares, as traders speculate on what the first round of results might mean for bank capital plans. Others warn of shareholder lawsuits if banks fail to disclose any information they receive, even informally, from regulators on the capital plans.
The Fed this year switched to the two-day schedule after banks sought to reduce the risk of embarrassing capital-plan rejections. The new schedule allows banks to reduce their buyback and dividend requests before the Fed announces its capital decisions publicly.
Also on Thursday, a Fed officer will privately notify the banks about the regulator's tentative decision on capital distribution plans, according to people briefed on the matter.
Fed guidelines released last week state that the bank cannot publicly release the initial results of its capital distribution plan unless "you have been provided a preliminary indication that it is required by securities law to disclose," said a person who reviewed the document.
The bank then has 48 hours to resubmit a capital distribution plan if the informal briefing from the Fed denies its initial request.