Goldman Sachs, JPMorgan, and 6 other banks suspend share buybacks to deal with 'unprecedented challenge' from the coronavirus outbreak

The banks are Bank of America, Bank of New York Mellon, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, State Street, and Wells Fargo.
The announcement from the big lenders comes just as t he Fed announced a 100-basis-point rate cut to near zero .
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A number of big US banks have announced that they will stop share buybacks until July due to the uncertain economic outlook created by the coronavirus pandemic.

On Sunday, the Financial Services Forum announced that its eight members Bank of America, Bank of New York Mellon, Citigroup, Goldman Sachs, JP Morgan Chase, Morgan Stanley, State Street and Wells Fargo cited the coronavirus pandemic as an "unprecedented challenge" for the world and the global economy.

Share buybacks refer to companies buying their own stock from the marketplace. This is one way for companies to boost the price of their stock and it's also considered a flexible way of returning money to shareholders.

Buybacks often receive criticism because the money spent on shares as part of a buyback could be used by the company for maintenance or innovation. A number of politicians too are opposed of the idea . Democratic presidential candidate Bernie Sanders announced a plan to ban stock buybacks and treat large-scale stock buybacks as "stock manipulation."

Suspending share buybacks during the current market conditions signals that the banks want to be able to hold on to more cash.

"The decision on buybacks is consistent with our collective objective to use our significant capital and liquidity to provide maximum support to individuals, small businesses, and the broader economy through lending and other important services," the Financial Services Forum said in its statement on Sunday.

The statement further states that each of the eight big banks can restart the process as soon as the "circumstances warrant."

The S&P 500 banks index is down more than 30% since the start of the year on the back of the coronavirus pandemic. Moreover, the plunging interest rates from central banks have piled further pressure on banks' profitability. Banks prefer rising interest rates as they boost their ability to lend out money to investors at a profitable rate. Low rates restrict the bank's ability to make profits.

The announcement from the big lenders comes just as the Fed announced a 100-basis-point rate cut to near zero , along with a major stimulus package that includes $700 billion in asset purchases.

"The coronavirus outbreak has harmed communities and disrupted economic activity in many countries, including the United States," the central bank said in a statement on Sunday.

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