WASHINGTON: The Federal Reserve on Friday eased rules on major US banks meant to protect the financial system during the Covid-19 pandemic, allowing share buybacks and dividends to resume in certain circumstances.

The central bank this year ordered 34 major US banks to suspend share buybacks in the last two quarters of 2020 and to limit dividend payments.

However on Friday the Fed modified its regulations, saying for the January-March period of next year, "both dividends and share repurchases will be limited to an amount based on income over the past year."

Firms not earning income won't be able to pay dividends or make share repurchases, the central bank said.

Shortly after the announcement, JPMorgan Chase said it would repurchase $30 billion in shares starting in the first quarter. The Fed also released results of its second banking stress test of the year, which found that financial institutions "generally had strong levels of capital" even as they faced an uncertain outlook.

"The banking system has been a source of strength during the past year and today's stress test results confirm that large banks could continue to lend to households and businesses even during a sharply adverse future turn in the economy," Fed Vice Chair for Supervision Randal K. Quarles said. The Fed normally conducts one stress test a year, but added a second in 2020 given the pandemic and the United States' entry into a recession.