“The Federal Reserve waved most big, U.S. banks past the capital-return finish line Thursday. But investors shouldn’t take too many victory laps.

“The Fed’s decision, coming a week after it released “stress-test” results, raised questions about two of the biggest U.S. banks, J.P. Morgan Chase and Goldman Sachs. It may also fuel further debate about new capital rules and whether banks have too much room to game the system.

“J.P. Morgan and Goldman were given only conditional approval for plans to increase dividends or repurchase stock. While they can still do so, the banks must fix problems with their planning process or potentially face rejection by the Fed later in the year. Although the Fed didn’t detail the problems, they related to issues concerning how the firms came up with loss or revenue estimates in the stress tests.

“Granted, investors may be tempted to shrug off questions about processes, focusing instead on what they will get back. J.P. Morgan said it would raise its dividend in the second quarter to 38 cents a share, from 30 cents, while its board authorized the repurchase of $6 billion in stock. Still, this conditional Fed approval comes less than a year after J.P. Morgan’s “London Whale” trading debacle, which revealed deficiencies in internal controls.”

***

Read full Wall Street Journal article here