Major US banks halt share buybacks in response to coronavirus pandemic

Dive Brief:

The U.S.’s largest banks pledged on Sunday to halt share buybacks through the second quarter of the year in response to the coronavirus pandemic, according to a statement from the Financial Services Forum.
The economic policy and advocacy organization’s member institutions include Bank of America, Bank of New York Mellon, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, State Street and Wells Fargo.
"The decision on buybacks is consistent with our collective objective to use our significant capital and liquidity to provide maximum support to individuals, small businesses, and the broader economy through lending and other important services," the group said in a statement.

Dive Insight:

The forum called the COVID-19 pandemic "an unprecedented challenge for the world and the global economy" and said the U.S.’s largest banks have an "unquestioned ability and commitment" to support the nation.

The group’s announcement follows a call Sen. Sherrod Brown, D-OH, made on the Senate floor Thursday, when he asked banks to suspend buybacks and use their capital to invest in communities instead of "investing in their CEOs’ stock portfolios."

The topic of share buybacks also came up during a House Financial Services Hearing last week, where Rep. Brad Sherman, D-CA, asked Wells Fargo CEO Charlie Scharf if he could commit to suspending the bank’s $31.4 billion stock buyback plan amid the economic uncertainty caused by the virus.

"We’re going to run the bank the way we think is prudent with our regulators," Scharf responded.

The Financial Services Forum’s decision to suspend share buybacks also follows several major actions by the Federal Reserve, which implemented its second emergency rate cut in two weeks on Sunday, as the regulator attempts to use its tools to quell market disruption.

The agency also slashed reserve requirements for thousands of banks to zero and said it plans to purchase an additional $700 billion worth of U.S. Treasury bonds and mortgage-backed securities.

The Fed also encouraged banks to keep lending to companies and consumers negatively impacted by the coronavirus, following similar calls from the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corp. (FDIC).

The two regulators released separate statements on Friday, encouraging banks to waive fees and allow flexible loan repayment options for impacted customers and said prudent efforts to modify the terms on existing loans for affected customers will not be subject to examiner criticism.