Dividends and share buybacks at systemically important banks should be halted if financial supervisors become concerned about credit availability, Boston Fed President Eric Rosengren said in a speech in Stockholm, Sweden, according to a transcript of his remarks.
He suggested supervisors use both market triggers -- like stock-market prices -- as well as capital triggers in deciding whether to suspend buybacks and dividends.
"While Basel III has proposed dividend reductions as capital becomes depleted, I suspect that is likely to be too late, given the slow pace at which accounting losses are realized," Rosengren said. He added that foreign branches might be required to have greater liquidity from their global parents or to separately hold capital, with Rosengren preferring the separate capital option.
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