The Federal Reserve has removed the temporary caps on dividends and buybacks it imposed on large banks last summer after performing well on annual stress tests, the WSJ reported.
The Fed loosened restrictions after stress tests found that the 23 large banks included would still be able to fulfill their minimum requirements in a worst-case scenario.
The test results showed that should there be a global recession, the banks would lose over $470 billion but capital ratios would still be more than double the minimum needed at 10.6%.
The Fed conducted an additional test on top of the scheduled annual test to account for the COVID-19 pandemic. Four banks opted into the test while 19 were required.
Lenders have released nearly $800 billion in the form of loans to small businesses in May but some have cut down on lending to existing customers.
Analysts believe bank stocks will bounce further due to increased dividends and share repurchases. The KBW Nasdaq Bank Index has grown 28% year-to-date.
