US banks urged to avoid increasing dividends to shareholders, newspaper claims

11 March 2010

US banks including Goldman Sachs and JPMorgan have been urged to avoid re-purchasing shares or raising dividends until financial stability is fully restored, a newspaper report has claimed.

A source close to the matter told the Financial Times that US banking regulators have urged bigger financial service providers to wait until the health of the economy is back to full strength before redistributing funds.

The Federal Reserve, the Treasury and a number of government agencies have urged caution among banks in a move that may see many shareholders waiting for some months before they receive a return on their investment.

One Wall Street executive told the newspaper: “Regulators are gun-shy at this stage, partly because they fear that giving the green light to healthier banks to return cash to investors would prompt demands from more troubled institutions to do the same.”

Many financial firms such as Goldman Sachs, which maintained a strong balance sheet despite the global crisis, received a letter last year urging stress tests to be carried out before making commitments to shareholders.

Representatives from the banks have so far declined to comment.

By Jim Ottewill

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