The Federal Reserve issued guidance today that would allow some of the nation’s large banks to increase dividend payments and buy back shares.

The Fed also said the 19 banks that were subject to stress tests last year will have to submit updated capital plans by early next year that can be used to evaluate their ability to withstand losses under "adverse" economic scenarios.

"The capital plan review is the latest step in the Federal Reserve’s efforts to enhance supervision of banking organizations," the Fed said in a release. The Fed said it will review these plans on a regular basis going forward.

Banks have been pushing to boost dividends. Regulators have balked at giving them the green light, citing uncertainty about the economic outlook and new capital rules.

With global capital rules and the federal financial regulatory system retooling farther down the track, the environment is more conducive to letting strong banks increase dividend payments.

Under the plan, banks that want to increase dividend payments will have to meet strict standards laid out by the Fed.

They will have to show they can absorb losses over the next two years under situations where there are broad economic problems and problems specific to a firm’s business model.

Banks will also have to show that they will be able to meet the new international capital standards in the Basel III agreement as well as how they will deal with any impact the new financial reform law will have on their business models.

The Fed said banks would be expected to repay any government funding they have received before boosting dividends.

"We also expect that firms will have a sound estimate of any significant risks that may not be captured by the stress testing, such as potential mortgage putback exposures, and the capacity to absorb any consequent losses," Fed Gov. Daniel Tarullo said in a speech on Nov. 12.

The Basel rules, which have to be implemented by each country, will force banks to hold top-quality capital equal to 7 percent of risk-bearing assets, more than triple current standards, to better withstand economic downturns and financial shocks.

Banks will have until 2015 to meet the minimum core Tier 1 capital requirement, which consists of shares and retained earnings worth at least 4.5 percent of assets. An additional 2.5 percent "capital conservation buffer" will have to be in place by 2019. (Reuters)