Wells Fargo says the Federal Reserve signed off on a plan to raise its dividend to 37.5 cents

Associated Press

Wells Fargo says the Federal Reserve cleared an increase in its dividend.

The San Francisco bank says it plans to raise its dividend to 37.5 cents from 35 cents in the second quarter.

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The move comes after the Federal Reserve concluded that Wells Fargo & Co. can afford the larger dividend and remain adequately capitalized in a severe financial crisis.

Last week, the Fed announced that Wells Fargo and 30 other banks passed its annual "stress tests." The tests are designed to make sure the largest banks in the U.S. are strong enough to withstand a severe U.S. and global recession and keep lending.

The Fed approved most banks' capital plans on Wednesday but ordered Bank of America and units of Deutsche Bank and Santander to revise their plans.