Entries Tagged 'Investing' ↓

Regulatory authorities in Washington have announced that 10 banks are in need of additional capital in the amount of $74.6 billion to restore confidence in the banking sector and to survive the recession, write Reuters.

The results of stress tests, organized by the U.S. central bank, Federal Reserve have drawn a line between the banks with a better financial situation and those facing problems, indicating the amounts they need to stabilize finances.

The tests have shown that 10 banks needed additional capital to make against future losses, if the recession will worsen. Bank of America needs 33.9 billion U.S. dollars, while Citigroup needs 5.5 billion dollars.

Also, Wells Fargo must collect 13.7 billion U.S. dollars, and GMAC 11.5 billion U.S. dollars. Obama Administration hopes that these banks will fill gaps from private sources, although the Fed chief, Ben Bernanke, said that the government is prepared to take action, if it’s necessary.

“Government, through Treasury, is prepared to provide additional capital necessary to ensure that the bank will cross this tough economic period, “said Bernanke.

Bank of America will be forced to attract additional capital amounting to up to $34 billion, the largest amount among the 19 tested institutions by the Treasury Department. B of A, which has already received about 45 billion dollars from U.S government, may sell part of its shares held in the China Construction Bank, to attract about 8 billion dollars.

The U.S. authorities intends to impose tough conditions to banks who want to repay support funds received from the government, asking them to demonstrate that are able to issue securities without government insurance, writes Financial Times.

This new condition, confirmed by a U.S. official, could prevent some banks to repay federal funds in advance. Banks have issued over 300 billion U.S. dollars of titles provided by the FDIC. Previously, a second U.S. official said that the banks who want to repay federal funds it might be ask, at the same time, to prove they can attract capital from private investors.

The new conditions are part of a plan for reimbursement, which could be made public shortly before announcing the results of stress tests.