OVER the years, the grumbles have got louder. Since 2011 America’s big banks have undergone annual “stress tests” overseen by the Federal Reserve, along with scrutiny of their plans for paying dividends and buying back shares. A product of the post-crisis Dodd-Frank act, the tests are intended to make sure that lenders have enough equity on hand should catastrophe strike again. But banks say they are both opaque and burdensome. And because failure can mean a block on payouts, the tests have bred caution and ire.

The time for caution seems to be over. On June 28th the Fed said it had approved the dividend and buy-back plans of all 34 banks tested this year—plans which propose handing shareholders a pile of cash. All 34 also passed the first stage, results of which were revealed six days earlier and which assume no repurchases and unchanged dividends. Even under a “severely adverse” scenario involving a nasty recession, all would keep key capital ratios above the...Continue reading