Fed backs JPMorgan plan for buyback The Federal Reserve has approved JPMorgan Chase's plan to purchase up to $3bn of its shares next quarter in a move that analysts reckon could herald more dividends and stock buybacks by the largest US banks. Later this month, the Fed will detail the assumptions that lenders should use when they carrying out stress tests, which will guide their requests to return capital to shareholders. For example, the Fed last year said that banks should plan for an economic environment in which the US unemployment rate in 2012 reached nearly 13 per cent. It rose to 7.9 per cent earlier this month. JPMorgan in March had planned on buying up to $15bn in shares this year and the first quarter of 2013. The bank suspended those plans a few months later in the wake of roughly $7bn in derivatives losses sustained by its trader nicknamed the "London Whale." The resumption of its 2013 plans, disclosed in a regulatory filing with the US Securities and Exchange Commission, was approved by the Fed on Monday. Analysts said that it was a sign of the Fed's confidence in JPMorgan, and perhaps a signal of confidence in the broader US banking system. Glenn Schorr of Nomura said: "It's a positive sign for this year's upcoming [stress test] process." Mr Schorr was among analysts who said that banks that have previously received regulatory approval for dividends and share repurchases, such as JPMorgan, Wells Fargo and Goldman Sachs, will increase their capital distribution next year. Citigroup and Bank of America, which have been restricted by regulators, should get approval to increase dividends and start buying back more stock, said Jason Goldberg, Barclays analyst. "Virtually every bank will increase their dividends next year," Mr Goldberg added. If that happens, Mr Staite said "it would be a clear sign of [the Fed's] confidence and would give a significant boost to their share prices." Analysts attributed their confidence to stronger bank balance sheets and capital levels, as opposed to a relaxing of the Fed's standards. The Fed has been pushing for higher capital but they just can't keep raising it. The banks have reached the level the Fed has asked for," Mr Schorr said. In its securities filing, JPMorgan also disclosed that it had reached an "agreement in principle" with the SEC's staff to resolve two investigations related to mortgage-backed securities. It cautioned that there was no assurance that the agreements ultimately will be approved. Still, litigation-linked losses exceeding its reserves could hit $6bn, an increase of $700m from last quarter, JPMorgan said. Investors also increased the amount of mortgage-linked claims against the bank. About $140bn of mortgage securities are now in dispute, up from $130bn last quarter.