The Federal Reserve extended deadlines until next year for new capital plans from Citigroup Inc. (C:US) and the U.S. units of HSBC Holdings Plc (HSBA), Royal Bank of Scotland Group Plc (RBS) and Banco Santander SA (SAN) after objecting to earlier versions.
The four banks’ June 26 deadline was pushed to Jan. 5, the due date for the next round of annual plans, the Fed said today in a statement in Washington. Regulators objected to the companies’ submissions during the central bank’s 2014 Comprehensive Capital Analysis and Review, a stress test measuring their ability to withstand a severe recession.
“The firms will not be able to increase their capital distributions until a new capital plan is approved,” the Fed said in the statement. “The extensions will give the firms additional time to address the capital-planning weaknesses identified by the Federal Reserve.”
The tests help determine whether a bank can increase dividends and stock buybacks. The Fed in March said it found deficiencies in the banks’ capital-planning processes. It took issue with Citigroup’s ability to project revenue and losses in its global operations, and rejected the New York-based firm’s request to quintuple its dividend and repurchase $6.4 billion of shares.
Citigroup, the biggest bank to fail, asked Eugene McQuade, a veteran executive, to cancel his retirement and lead the company’s submissions.
Chief Executive Officer Michael Corbat, 54, has said previously that Citigroup will focus on preparing for the 2015 stress test rather than requesting additional buybacks or dividend increases this year.
“Our shareholders deserve an industrial-strength, permanent solution that paves the way for sustainable capital return over time,” Corbat said April 14. “What I don’t want to do is find ourselves in a position of needing to rush to get a capital submission in sometime late third quarter, early fourth quarter to not get the work done properly.”
Mark Costiglio, a Citigroup spokesman, declined to comment on the Fed’s statement, as did Santander’s Nancy Orlando.
“We have been working closely with our regulators on the resubmission of our CCAR capital plan, and will continue to refine our planning processes as we work toward the Jan. 5 deadline,” said Robert Sherman, a spokesman for London-based HSBC.
Jim Hughes, an RBS spokesman, didn’t respond to an e-mail.
Zions Bancorporation, which failed the Fed’s annual test after officials determined its capital fell below the required minimum, resubmitted its plan in April, James Abbott, a spokesman for the Salt Lake City-based company, said in a phone interview.
“Remediating or fixing a quantitative shortfall is easy,” Abbott said. “The qualitative shortfall, which the other four banks are dealing with, takes months and millions of dollars. It is impractical to complete those remedies within” a shortened time frame, he said.
To contact the reporters on this story: Jeff Kearns in Washington at firstname.lastname@example.org; Dakin Campbell in New York at email@example.com
To contact the editors responsible for this story: Peter Eichenbaum at firstname.lastname@example.org Steve Dickson, Steven Crabill