Citigroup (C), Royal Bank of Scotland (RBS), and HSBC Holdings Plc (HSBC) were three of the five banks that failed the Federal Reserve’s stress tests.

Bank of America(BAC) and Goldman Sachs (GS) were able to squeak out passes, but only after they modified downward their requests for dividends and buybacks. Some 23 other banks also had their plans approved by the Fed.

Banco Santander SAand Zions Bancorporation, two banks HousingWire doesn’t regularly cover, also failed.

The central bank did not pass four of the banks based on qualitative concerns and one, Zions, because it did not meet a minimum post-stress capital requirement.

Strong capital levels help ensure that banking organizations have the ability to lend to households and businesses and to continue to meet their financial obligations, even in times of economic difficulty.

Now in its fourth year, the Federal Reserve in Comprehensive Capital Analysis and Review annually evaluates the capital planning processes and capital adequacy of the largest bank holding companies, including the firms' proposed capital actions such as dividend payments and share buybacks and issuances.

The goal is to avoid the same circumstances that led to the 2008 financial crash.

“Needless to say, we are deeply disappointed by the Fed’s decision regarding the additional capital actions we requested. The additional capital actions represented a modest level of capital return and still allowed Citi to exceed the required threshold on a quantitative basis," Michael Corbat, Citi’s Chief Executive Officer, said. "We will continue to work closely with the Fed to better understand their concerns so that we can bring our capital planning process in line with their expectations and meet their standards on a qualitative basis as well. We have not yet made a decision as to when we will resubmit our plan.

“We clearly are being challenged to meet the highest standards in the CCAR process. Despite whatever shortcomings the Fed saw in our capital planning process, we have made tremendous progress over the past several years in enhancing our capital position and Citi remains one of the best-capitalized financial institutions in the world. We will continue to work incredibly hard to serve our clients and generate the returns our shareholders expect and deserve,” Corbat said.

(Note: Revised at 5:03 p.m. ET to include Citi statement.)