The Fed only said banks could buy back shares. JPMorgan and Goldman Sachs fire.

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The latest results from the Federal Reserve’s stress tests have been published and, if the stock market is an indication, many large banks appear to have passed.

Starting next month, the central bank will allow banks to buy a certain amount of shares based on their previous year’s income. This represents a change from this year: in March, eight large banks stopped their stock repurchase programs because of the coronavirus. In June, the Fed demanded that banks stop repayments and limited dividend payments based on recent income.

A couple of big banks have already responded to the Fed’s decision by announcing rewards that will begin in the first quarter of 2021. In a statement following the Fed’s announcement,

JPMorgan

Chase said his board approved a new $ 30 billion share repurchase program.

Goldman Sachs

said it intends to resume its share repurchase program next quarter.

The Fed move was welcome, but a little surprising. Although the Fed frequently made public the strength of the financial sector, it was expected that rewards would only be allowed to resume when the economy was on a firmer footing. The increase in coronavirus cases and the economic constraints they caused led many to think that rewards would be allowed during the second half of next year.

This was the second round of stress tests the big banks had to go through. Banks performed well in June, but given the unprecedented nature of the pandemic, the Fed wanted to test them once again. This most recent round of testing led to a high level of unemployment and an economy that took several quarters to recover. Even at the time the test scenarios were announced, the Fed admitted that the scenarios were “significantly more severe than most current base projections for the path of the U.S. economy.”

Bank shares gained in trading outside the hours after the announcement. Around 6 p.m., New York time, the

SPDR Sector Select Financial Fund

(XLF) rose 3.3%, JPMorgan shares rose 5%, Goldman Sachs shares rose 5.1% and

bank of america

rose 4.7%.

Write to Alexandra Scaggs to [email protected]