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Bank Stress Tests to Reduce Dividends?

Lloyds BankIt has always been something of a risk in the last few years placing Binary Options trades on Banks, for many of the big Banks have been forced to pay compensation and huge fines for wrong doing in the run up to and during the financial crisis.

However, as a Binary Options trader you do always have the chance of placing Binary Options trades on Banks in the hope that as well as their respective share values increasing they could reduce in value too over any given time period.

When people buy stocks and shares in any institution they are of course hoping their shares will rise in value and will also see them earning dividends, and when anything could possibly affect the dividends they receive then there is usually a rush to dispose of those shares and that often results in the share values dropping.

There is something going on over in the UK at the moment which is looking likely to see many banks having to stop paying out dividend in the very near future, and this is a series of what are known as stress tests.

These stress tests are designed to see how well each bank can cope should there be another financial crisis, and banks that do not have enough financial assets set aside to cope which such situation and being told they must increase their financial reserves.

That does of course mean that any bank required to set aside more financial reserves after having failed the street test will have to curtail paying their share holders dividends until they have enough surpass cash set aside as per the street test requirements.

One major UK bank that is looking likely to have to increase its financial reserves is Lloyds Bank, now that bank is currently part owned by the UK Government who are looking to see off their remaining share of the bank in the very near future.

However, with the bank possible going to be ceasing paying dividends whilst is successfully manages to build up enough financial reserves the share price may be about to drop, more so if the market becomes flooded with shares for sale.

Just keep those stress tests in mind as there may be some additional banks failing them, and if so it is almost a sure-fire bet their share values will drop if those banks opt to cut paying out dividends in the short or long term.

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