The Federal Reserve issued a final rule requiring top-tier U.S. banks to submit annual capital plans and launched its new 2012 bank stress test for more than 30 banks - compared with 19 institutions in past years.  The smallest will have to provide less information to the Fed.

Banks that will have to comply with the new rules include:  Bank of America  ...  JPMorgan ...  Wells Fargo  ...  Citigroup  ...   Morgan Stanley  ...  Goldman Sachs.

Scope of Stress Tests. The second annual Comprehensive Capital Analysis and Review ("CCAR") will carry out a supervisory stress test based on the same stress scenario provided to the firms to support its analysis of the adequacy of the firms' capital. Institutions will be expected to have credible plans that show they have sufficient capital so that they can continue to lend to households and businesses, even under adverse conditions, and are well prepared to meet regulatory capital standards agreed to by the Basel Committee on Banking Supervision as they are implemented in the United States. Boards of directors of the institutions will be required each year to review and approve capital plans before submitting them to the Federal Reserve. Institutions will be required to submit their capital plans by 1/9/12. Federal Reserve Annual Reviews. The Fed will evaluate institutions' capital adequacy, internal capital adequacy assessment processes, and their plans to make capital distributions, such as dividend payments or stock repurchases.  The Federal Reserve will approve dividend increases or other capital distributions only for companies whose capital plans are approved by supervisors and are able to demonstrate sufficient financial strength to operate as successful financial intermediaries under stressed macroeconomic and financial market scenarios, even after making the desired capital distributions. Banks that do poorly on the exercise - which also judges their capital planning and risk management - will be prevented from paying out increased dividends or share buy-backs. BofA’s capital plan was rejected this year.  The Fed said that even healthy banks which propose dividends of more than 30% of net income would “receive particularly close scrutiny.” For further details, go to:   [StreetInsider.com, 11/22/11]   and   [Financial Times, 11/22/11]