Ten of the US’ 19 biggest banks subject to government “stress tests” to measure their financial stability may need to raise more capital, the Wall Street Journal said yesterday.
The exact number of banks required to raise more funds has not yet been decided, the financial daily said, but those affected could include banking giants Wells Fargo, Bank of America and Citigroup.
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.
US banking regulators and the Federal Reserve are set to release results tomorrow from stress tests of the 19 banks and estimates for further public aid to help boost the ailing economy.
The tests will cap a period of suspense that began when the administration of US President Barack Obama unveiled in February its overhaul of the bank bailout in a bid to restore stability to the financial system of the world’s largest economy.
Fears surrounding Wells Fargo, Bank of America and Citigroup may have subsided, however, in light of the authorities’ stress test efforts, the Journal said, noting that the three bank’s stock prices have tripled since early March.
Wells Fargo stock surged 24 percent on Monday, Bank of America jumped 19 percent and Citigroup rose 7.7 percent.
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 ‘nationalize’ the banks that have the worst balance sheets and greatest needs for capital,” Douglas McIntyre, of the financial Web site 24/7 Wall Street, said 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 that the move “leaves them with the government as the lender of last resort.”
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