The Federal Reserve Building is reflected on a car in Washington in this September 16, 2008 photo. REUTERS/Jim Young
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The Federal Reserve 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 plans put forward by the U.S. businesses of two European banks, Germany's Deutsche Bank and Spain's Santander. 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 that 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 remaining 30 banks were allowed to raise dividends or repurchase shares. A number of banks quickly jumped in with announcements of share buyback plans. The Fed said the 33 big banks would sustain $385 billion in loan losses under the most dire scenario. But even with those losses, all the banks would still together hold a high-quality capital ratio of 8.4 percent, well above the 4.5 percent minimum.
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