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US Planning to reveal bank stress test results for Top 19 Banks to restore confidence.
By Amarendra Bhushan for CEOWORLD Magazine Updated:April 15, 2009
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The US government could disclose bank stress test results details about the financial health of its top 19 biggest banks in a bid to reassure investors and restore confidence in the financial system.
US government regulators are conducting stress tests at the 19 largest U.S. banks such as Citigroup, JPMorgan Chase & Co and Wells Fargo, to determine their capital needs if economic conditions were to deteriorate further.
The New York Times, quoting unnamed senior officials, said the administration of President Barack Obama was considering publishing the results of its analysis of individual banks, known as its ’stress-tests.’
‘It’s becoming clearer that we and the banks are going to have to explain clearly where each bank falls in the spectrum,’ the paper quoted an official saying.
To date Washington has been reticent about publishing details of its analysis, fearing frankness would spark a run on banks deemed to have faired poorly compared to competitors.
The markets are anxiously anticipating the outcome of the tests. The Treasury and Federal Reserve have instructed banks to not talk about the stress tests during the first-quarter earnings season, which is scheduled to wrap up for most of the major banks by April 24.
The stress tests are designed to measure how well the banks would weather difficult economic conditions over the next two years. Regulators are trying to determine how much assistance banks might need to continue lending in such circumstances.
- All of the banks are expected to pass the tests.
- Any bank that looks weak under the circumstance of the trials will be asked to raise capital.
- Banks that need more capital will get six months to raise it from private investors or take cash infusions from the government.
President Obama was scheduled Friday to discuss the results with Treasury Secretary Timothy Geithner, Federal Reserve Board Chairman Ben Bernanke, Federal Deposit Insurance Corp. Chairman Sheila Bair and Comptroller of the Currency John Dugan.
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