NEW YORK (CNNMoney.com) -- The Federal Reserve issued a new set of guidelines Wednesday that pave the way for healthy banks to begin hiking dividends and repurchasing shares next year.
The Fed said that the 19 banks that completed the Fed's stress tests in May 2009, including Bank of America (BAC, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and Goldman Sachs (GS, Fortune 500), will have to submit their capital plans for 2011 early next year and detail the strength of their balance sheets.
The central bank will evaluate the banks' plans using "a number of criteria," with emphasis on the ability to absorb losses over two years, even under "adverse" economic conditions.
The Fed said banks must also repay or replace any government investment in the form of preferred or common stock before raising payouts or buying back shares.
Many of the larger banks have been paying just a penny or a nickel per share dividend each quarter since the financial sector cratered in 2008.
Limiting shareholder payouts has helped the banking giants restore their capital bases over the past two years. But some investors in those banks are eager for higher dividends now that the worst appears to be over for the financial sector.
Federal Reserve Governor Daniel Tarullo called the central bank's approach to handling requests by big bank holding companies "conservative" during in a speech last week, before the guidelines were released.
He said the Fed will move slowly in approving higher dividends in order to maintain stability in the financial system. 
| Index | Last | Change | % Change |
|---|---|---|---|
| Dow | 12,454.83 | -74.92 | -0.60% |
| Nasdaq | 2,837.53 | -1.85 | -0.07% |
| S&P 500 | 1,317.82 | -2.86 | -0.22% |
| Treasuries | 1.74 | -0.01 | -0.80% |
| Company | Price | Change | % Change |
|---|---|---|---|
| Bank of America Corp... | 7.15 | 0.01 | 0.14% |
| Sprint Nextel Corp | 2.62 | 0.09 | 3.56% |
| Cisco Systems Inc | 16.33 | -0.06 | -0.37% |
| Chesapeake Energy Co... | 15.81 | 0.23 | 1.48% |
| Ford Motor Co | 10.60 | 0.01 | 0.09% |
|
The Senate hearing will focus JPMorgan's recent $2 billion trading loss, which Dimon announced earlier this month. More |
The offer for mail handlers is part of the Postal Service's plan to cut 150,000 jobs by 2015. More |
In the whirlwind of its IPO fallout, there has been a sort of glee in watching the company stumble. What's driving the Facebook-schadenfreude and what can the social network do about it? More |
One in six children in the United States is obese. These small businesses have found creative -- and lucrative -- ways to fight the childhood obesity epidemic. More |
In Harper County, Kansas, oil companies are offering farmers up to $1,250 an acre for the mineral rights that allow them to drill for oil on their property. More |
.
