US banks require capital boost
(13 May 2009 – USA) The US Government stress test has found that ten of the 19 biggest US banks require extra capital to the tune of US$75 billion (A$99 billion).
The Governmentfs Supervisory Capital Assessment Program (SCAP) identified the potential losses, resources available to absorb losses, and resulting capital buffer needed for the 19 participating Bank Holding Companies (BHCs).
The forward-looking assessment of the financial conditions of Americafs 19 largest banks found that ten banks will be required to boost tier one common capital.
Federal Reserve chairman, Ben Bernanke, said that the quality of capital is what seems to be the weakness of the capital structure at present.
Of the ten banks that require extra capital, banking giant Bank of America requires the biggest capital injection at US$33.9 billion.
Substantial amounts are also required at Wells Fargo ($US13.7 billion) and GMAC (US$11.5 billion). Major banks, Citigroup and Morgan Stanley were also told that they need to raise capital.
Regions Finance, Fifth Third Bancorp, KeyCorp, PNC Financial Services Group and SunTrust Banks also were told to increase their reserves.
The other banks, namely; American Express, Bank of New York Mellon, BB&T, Capital One Financial, Goldman Sachs, JPMorgan Chase, MetLife, State Street, and US Bancorp don't need to raise additional capital.
The results of the SCAP also indicated that if the US economy were to track at the estimated more adverse scenario, losses at the 19 firms during 2009 and 2010 could be US$600 billion.
The bulk of the estimated losses, approximately US$455 billion, come from losses on the banksf accrual loan portfolios, particularly from residential mortgages and other consumer]related loans.
The forward-looking assessment of the financial conditions of Americafs 19 largest banks found that ten banks will be required to boost tier one common capital.
Federal Reserve chairman, Ben Bernanke, said that the quality of capital is what seems to be the weakness of the capital structure at present.
Of the ten banks that require extra capital, banking giant Bank of America requires the biggest capital injection at US$33.9 billion.
Substantial amounts are also required at Wells Fargo ($US13.7 billion) and GMAC (US$11.5 billion). Major banks, Citigroup and Morgan Stanley were also told that they need to raise capital.
Regions Finance, Fifth Third Bancorp, KeyCorp, PNC Financial Services Group and SunTrust Banks also were told to increase their reserves.
The other banks, namely; American Express, Bank of New York Mellon, BB&T, Capital One Financial, Goldman Sachs, JPMorgan Chase, MetLife, State Street, and US Bancorp don't need to raise additional capital.
The results of the SCAP also indicated that if the US economy were to track at the estimated more adverse scenario, losses at the 19 firms during 2009 and 2010 could be US$600 billion.
The bulk of the estimated losses, approximately US$455 billion, come from losses on the banksf accrual loan portfolios, particularly from residential mortgages and other consumer]related loans.
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