Bank stocks jumped Thursday after the Wall Street Journal reported the Federal Reserve would soon allow the major financial institutions to issue dividends, and investors are on the move. Investment bank FBR Capital Markets said financial firms PNC Financial (PNC), U.S. Bank (USB) and JPMorgan Chase (JPM) would be “particularly strong” because of their healthier capital levels their already stated desire to increase dividend payments. The Journal story gave no particulars on how the Fed would determine which banks could issue the payments and which ones couldn’t. Paul Miller at FBR said the likely parameters would include Tier 1 common capital ratio, return on assets, and whether or not the institutions has paid back Troubled Asset Relief Program funds. “The Fed is unlikely to allow any banks to raise their dividends unless capital levels exceed a certain benchmark. In addition, even if capital ratios do exceed required levels, we expect the Fed will also want banks to demonstrate sufficient internal capital generation and earnings power,” according to FBR. FBR included a list of banks, their capital ratios and whether or not they’ve paid back TARP dollars. Miller added that while he would rather see the banks hold onto that capital until the economy shows more concrete evidence of improvement he guided investors to target the larger banks over more regional ones. Write to Jon Prior. The author held no relevant investments.