<TABLE border=0 cellSpacing=0 cellPadding=0 width=452><TBODY><TR><TD vAlign=top width=452 colSpan=2>Published May 6, 2009
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>10 stress-test banks may face call to raise capital
They could include Citi, Wells Fargo and BOA, says report
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(WASHINGTON) About 10 of the 19 largest US banks being stress tested will be instructed by regulators to raise more capital, according to a source familiar with official talks.
<TABLE class=picBoxL cellSpacing=2 width=100 align=left><TBODY><TR><TD>
</TD></TR><TR class=caption><TD></TD></TR></TBODY></TABLE>The banks have been negotiating with their regulators about the depth of their capital needs, should the recession prove to be deeper and longer than anticipated.
Markets have been anxiously anticipating the results, which will differentiate the strongest banks from those still expected to sustain considerable credit losses.
The exact roster of banks needing to build their capital positions is still unclear. Banks were expected to be briefed on the official results yesterday.
The Federal Reserve and Treasury Department will also tell them how policy-makers plan to publicly unveil the market-sensitive results, the source said, speaking anonymously because the discussions are private.
The Treasury and Fed declined to comment on how many banks will be directed to raise more capital.
The largest US banks have spent recent days making the case to regulators that they have the financial firepower to withstand a deeper recession, as Bank of America on Monday denied a report it was trying to raise capital of US$10 billion.
The exact number of banks required to raise more funds has not yet been decided, but those affected could include banking giants Wells Fargo, Bank of America and Citigroup, The Wall Street Journal reported yesterday.
The number of banks thought to need more funds had been 14 out of 19 at one point, the Journal said, citing sources familiar with the matter.
Fears surrounding Wells Fargo, Bank of America and Citigroup may have subsided, however, in the light of the authorities' stress test efforts, the Journal said, noting that the three banks' stock prices have tripled since early March.
Wells Fargo stock surged 24 per cent on Monday, Bank of America jumped 19 per cent and Citigroup rose 7.7 per cent.
Bank-specific details are set to be unveiled tomorrow after Wall Street closes for the night.
With grim results expected from the stress tests, the Obama administration 'is giving itself the opportunity to 'nationalise' the banks that have the worst balance sheets and greatest needs for capital', said Douglas McIntyre of the financial website 24/7 Wall Street in advance of this week's trading.
The banks 'may turn to the private capital markets where their attempts to raise money after getting low stress test scores will fail', he said, adding the move 'leaves them with the government as the lender of last resort'.
Some industry insiders worry the stress test results come at a time when the sector is starting to see positive effects from some surprisingly strong first-quarter earnings figures.
'I think the great risk there is that you create some new uncertainty and concerns at the very time the financial condition of the banking industry is turning for the better,' Wayne Abernathy, an executive at the American Bankers Association and a former Treasury official, said on Monday. -- Reuters, AFP
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</TD></TR><TR><TD vAlign=top width=452 colSpan=2>10 stress-test banks may face call to raise capital
They could include Citi, Wells Fargo and BOA, says report
<TABLE class=storyLinks border=0 cellSpacing=4 cellPadding=1 width=136 align=right><TBODY><TR class=font10><TD width=20 align=right>
</TD><TD>Email this article</TD></TR><TR class=font10><TD width=20 align=right>
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</TD><TD>Feedback</TD></TR></TBODY></TABLE>(WASHINGTON) About 10 of the 19 largest US banks being stress tested will be instructed by regulators to raise more capital, according to a source familiar with official talks.
<TABLE class=picBoxL cellSpacing=2 width=100 align=left><TBODY><TR><TD>
</TD></TR><TR class=caption><TD></TD></TR></TBODY></TABLE>The banks have been negotiating with their regulators about the depth of their capital needs, should the recession prove to be deeper and longer than anticipated.Markets have been anxiously anticipating the results, which will differentiate the strongest banks from those still expected to sustain considerable credit losses.
The exact roster of banks needing to build their capital positions is still unclear. Banks were expected to be briefed on the official results yesterday.
The Federal Reserve and Treasury Department will also tell them how policy-makers plan to publicly unveil the market-sensitive results, the source said, speaking anonymously because the discussions are private.
The Treasury and Fed declined to comment on how many banks will be directed to raise more capital.
The largest US banks have spent recent days making the case to regulators that they have the financial firepower to withstand a deeper recession, as Bank of America on Monday denied a report it was trying to raise capital of US$10 billion.
The exact number of banks required to raise more funds has not yet been decided, but those affected could include banking giants Wells Fargo, Bank of America and Citigroup, The Wall Street Journal reported yesterday.
The number of banks thought to need more funds had been 14 out of 19 at one point, the Journal said, citing sources familiar with the matter.
Fears surrounding Wells Fargo, Bank of America and Citigroup may have subsided, however, in the light of the authorities' stress test efforts, the Journal said, noting that the three banks' stock prices have tripled since early March.
Wells Fargo stock surged 24 per cent on Monday, Bank of America jumped 19 per cent and Citigroup rose 7.7 per cent.
Bank-specific details are set to be unveiled tomorrow after Wall Street closes for the night.
With grim results expected from the stress tests, the Obama administration 'is giving itself the opportunity to 'nationalise' the banks that have the worst balance sheets and greatest needs for capital', said Douglas McIntyre of the financial website 24/7 Wall Street in advance of this week's trading.
The banks 'may turn to the private capital markets where their attempts to raise money after getting low stress test scores will fail', he said, adding the move 'leaves them with the government as the lender of last resort'.
Some industry insiders worry the stress test results come at a time when the sector is starting to see positive effects from some surprisingly strong first-quarter earnings figures.
'I think the great risk there is that you create some new uncertainty and concerns at the very time the financial condition of the banking industry is turning for the better,' Wayne Abernathy, an executive at the American Bankers Association and a former Treasury official, said on Monday. -- Reuters, AFP
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