The Federal Reserve Board is expected soon to start allowing healthy banks with strong capital levels to increase dividend payments, according to people familiar with the matter.
Regulators are expected to issue guidance outlining the standards banks must meet to increase such payments, the sources said.
Many banks have been in a holding pattern as regulators across the globe hashed out new rules requiring banks to hold more capital as a buffer against future losses. In the wake of the financial crisis, regulators have closely scrutinized banks' capital management, essentially freezing their ability to increase dividends.
But with global capital rules largely fleshed out and the U.S. financial regulatory overhaul under way, the Fed is expected to begin allowing strong banks to increase dividend payments.
The goal is to reward healthy banks and allow them to attract new investors by boosting payments, according to people familiar with the matter.
To get the Fed's green light, banks will have to show an ability to meet new global capital rules agreed to in Basel earlier this year and show a strong enough capital base to absorb any additional capital requirements under the U.S. regulatory overhaul.