Bank stocks rose in after-hours trading on the news, with Wells Fargo and JPMorgan Chase up around 1%. Lifting the restrictions only applies to institutions that maintain proper capital levels as evaluated through the stress tests. Under normal circumstances, capital distributions are guided by a bank’s “stress capital buffer,” a measure of capital that each bank should carry based on the riskiness of its holdings.
The income-based measures were put in place as a safeguard to make sure banks had enough capital as the pandemic tore through the U.S. economy. Any bank not reaching the target will have the pandemic-era restrictions reimposed until Sept. 30. Banks that still can’t meet the required capital levels will face even stricter limitations. The financial sector is one of the stock market’s leaders this year, with the group up 14.7% year to date on the S&P 500. People’s United, Fifth Third and Wells Fargo have led the banking space.