US Wall Street Banks Announce Suspension of Share Buybacks... "Loan Support for COVID-19 Response"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] Major Wall Street banks in the United States, including JP Morgan Chase, announced on the 15th (local time) that they will stop share buybacks and use their funds for loans to individuals and businesses economically impacted by the novel coronavirus infection (COVID-19).

According to CNBC and others, the Financial Stability Forum (FSF) stated in a press release that day, "The COVID-19 pandemic is an unexpected challenge to the world and the global economy. U.S. banks have the capacity to support our customers and the nation," announcing this decision.

The ban on share buybacks will continue until June 30 of this year. FSF members include JP Morgan, Bank of America (BoA), Citigroup, Morgan Stanley, Wells Fargo, and Goldman Sachs. Generally, share buybacks are a way for companies to return profits to shareholders and help boost stock prices. However, since it involves using funds, it reduces surplus capital.

The FSF said that companies and consumers are restraining activities to prevent the spread of COVID-19, and "member banks will use their funds to help businesses as difficult times approach." It added, "The decision regarding share buybacks aligns with the comprehensive goal of using the significant funds and liquidity we hold to provide maximum support to individuals, small and medium-sized enterprises, and the overall economy through loans and other essential services."

The FSF also stated, "This decision aligns with measures taken by the Federal Reserve (Fed), the White House, and Congress," adding, "If circumstances change, share buybacks may resume before June 30."

This move by major Wall Street banks appears to be part of efforts to prevent financial market turmoil caused by COVID-19. On the same day, the Fed lowered the benchmark interest rate by 1 percentage point to 0.00?0.25% and announced a $700 billion quantitative easing (QE) program. Additionally, six central banks?the Fed, European Central Bank (ECB), Bank of Japan (BOJ), Bank of Canada (BOC), Bank of England (BOE), and Swiss National Bank (SNB)?jointly responded by lowering swap rates and providing 84-day maturity operations to extend loan terms for dollar liquidity supply.