Fed gives OK to 30 banks to up dividends, buy back shares

WASHINGTON (AP) - The Federal Reserve on Wednesday gave the green light to plans by major banks in the U.S. to raise their dividends and buy back shares, judging their financial foundations sturdy enough to withstand a major economic downturn. The Fed rejected the plans put forward by the U.S. businesses of two European banks, Germany's Deutsche Bank and Spain's Santander.

Morgan Stanley's plan only got conditional approval, and it has until the end of the year to revise it. But the Wall Street institution was still allowed to return profits to shareholders, and it quickly announced plans to buy back up to $3.5 billion worth of its stock and to boost its dividend 33 percent.

As a result of its annual "stress tests," the Fed outright rejected plans by the U.S. division of Santander and by Deutsche Bank Trust Corp., the U.S. transaction bank and wealth management business of Germany's biggest bank. It was the third straight year the Fed rejected the plan of Santander, which is one of the biggest banks in Europe, and the second straight rejection for Deutsche Bank. The regulators said, although there have been improvements, the banks continue to have weaknesses in supervision that could harm their capital planning.

The remaining 30 banks were allowed to raise dividends or repurchase shares. They include JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc. and Wells Fargo & Co., which are the four biggest U.S. banks by assets.

A number of banks quickly jumped in with announcements of share buyback plans. They included Bank of America ($5 billion) and Citigroup (up to $8.6 billion).