Weekly Global News Wrap: US Fed stress test clears banks for stock buybacks; EU leaders promise to complete banking union someday
And banking jobs in Frankfurt are falling despite boost from Brexit.
Large banks will no longer face COVID-era restrictions on how much they can spend buying back stock and paying dividends, the Federal Reserve announced after finding the firms would remain well capitalised in its latest stress test.
The central bank said the test revealed that 23 of the largest firms would lose a combined $474b under a hypothetical severe downturn, but that would still leave them with more than twice as much capital required under Fed rules.
The results were met by a sigh of relief on Wall Street, where firms had been limited on what they can pay out to investors. Analysts expect banks like JPMorgan Chase, Bank of America and Goldman Sachs will be able to pay out more than $100b combined over the next four quarters.
Whilst European leaders have already promised to complete the European Union's (EU) banking union in the future, they will leave it to their finance ministers to work out when.
The completion of the banking union, which would mean setting up a controversial common deposit insurance scheme, would sharply lower the possibility of a major banking crisis in the countries sharing the euro and boost market confidence and demand for the currency.
But the issue is highly sensitive in several euro zone countries and euro zone finance ministers together with their non-euro colleagues from other EU countries have been stuck trying to agree on the deposit guarantee scheme for years.
A study by German lender Helaba showed that banking jobs in Frankfurt are declining despite a Brexit boost. Headcount at the city’s financial institutions will drop 5% by the end of 2023 to around 62,200 people, the lender predicts.
That is 3,300 fewer people than last autumn. Financial jobs in the city have generally been on the rise since 2014 amidst greater demand for staff overseeing compliance and regulation at banks.
Helaba expects 1,500 new Brexit-related jobs for Frankfurt this year and the next, on top of 2,000 such jobs already created in 2020 and earlier.