{"id":5637,"date":"2009-02-25T21:17:55","date_gmt":"2009-02-26T01:17:55","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=5637"},"modified":"2009-02-25T21:17:55","modified_gmt":"2009-02-26T01:17:55","slug":"bank-stress-dividends","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=5637","title":{"rendered":"Bank Stress & Dividends"},"content":{"rendered":"

The Fed has announced<\/a> its formal stress-testing policy, with a handy FAQ<\/a>.<\/p>\n

Q8: What will be the source of capital if supervisors determine that a banking organization requires an additional capital buffer?<\/b><\/p>\n

A: An institution that requires additional capital will enter into a commitment to issue a CAP convertible preferred security to the U.S. Treasury in an amount sufficient to meet the capital requirement determined through the supervisory assessment. Each institution will be permitted up to six months to raise private capital in public markets to meet this requirement and would be able to cancel the capital commitment without penalty. The CAP convertible preferred securities will be converted into common equity shares on an as\u2010needed basis. Financial institutions that issued preferred capital under Treasury\u2019s existing Capital Purchase Program (TARP 1) will have the option of redeeming those securities and replacing them with the new CAP convertible preferred securities.<\/p><\/blockquote>\n

<\/div>\n
<\/div>\n
<\/div>\n

Meanwhile, fresh from his claim that<\/a>:<\/p>\n

\u201cThey’re not going to cut the dividend at BMO,\u201d I told Berman, with all the confidence that comes from having an RRSP that’s overweight oil and gas. \u201cThere’s no way any of these big banks chop the payout.\u201d<\/p>\n

See, I know my Canadian banking history. Only one domestic player has cut its common stock dividend in recent memory \u2013 National Bank, after taking a pasting on corporate loans. The bank spent years in the penalty box as a result. No board wants to join this hall of shame.<\/p><\/blockquote>\n

… Andrew Willis has urged<\/a>:<\/p>\n

None of the five big banks have cut common share dividends since the Great Depression.<\/p>\n

I don’t know if history will be made in this downturn.<\/p>\n

But I do know that at least one blue-chip board – at Bank of Montreal – should cut the dividend in half.<\/p><\/blockquote>\n

I will forestall Assiduous Reader Norbert Schlenker<\/a> and point out that Scotia chopped dividends in WW2.<\/p>\n

Anyway, I mention this because ANZ Bank has cut its dividend<\/a> and so have a lot of US Insurers<\/a>. Precautionary common dividend cuts are becoming socially acceptable.<\/p>\n

Will BMO or others cut their dividend? I’m dubious. They are, at least, still covering their dividend with earnings and while number two and three might come pretty quickly, I don’t think anybody wants to be number one in the line-up. But, frankly … I don’t care a lot! I’m a pref guy!<\/p>\n","protected":false},"excerpt":{"rendered":"

The Fed has announced its formal stress-testing policy, with a handy FAQ. Q8: What will be the source of capital if supervisors determine that a banking organization requires an additional capital buffer? A: An institution …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-5637","post","type-post","status-publish","format-standard","hentry","category-banking-crisis-2008"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/5637","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=5637"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/5637\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=5637"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=5637"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=5637"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}