WASHINGTON, March 14 (Xinhua)-- U.S. Federal Reserve on Thursday released the result of the second phase of banking stress test, asking J.P. Morgan Chase and Goldman Sachs Group to resubmit their capital plans later this year.
The Fed did not explicitly reject the two banks plans to distribute capital but only gave them conditional approval. Both are required to submit new plans by the end of the third quarter to "address weakness" in their capital planning processes.
As part of the second step in the Fed's annual stress test of the biggest banks, the Fed evaluates the capital planning processes and capital adequacy of the largest banking holding companies, including the firms' proposed capital actions such as dividend payments and share buybacks and issuances.
In this year review, 14 of 18 institutions including Citigroup and Bank of America Corporation got Fed approval. Two firms, Ally Financial Inc. and BB&T Corporation had their plans rejected and will not be allowed to proceed with their plans, the Fed said.
"Now in the third year, the Federal Reserve's review of capital plans provides a regular, structured, and comparative way to promote and assess the capacity of large bank holding companies to understand and manage their capital positions, with particular emphasis on risk-measurement practices," Fed governor Daniel Tarullo said in a statement.
"The financial crisis showed not only that regulators needed to increase capital requirements and conduct regular stress tests, but also that firms need strong internal processes to evaluate their own capital needs based on their individual risks and circumstances," he added.