Stress Test Results Made Public

Posted by Orb Staff on May 08, 2009 No Comments
Categories : Residential Mortgage

ng-awaited [link=http://financialstability.gov/docs/SCAPresults.pdf][u]results[/u][/link] of the federal government's stress tests, performed on the nation's 19 largest financial institutions, have finally been released. The tests show how well-capitalized banks are for more adverse economic scenarios. Ten of the institutions need to increase capital, according to the tests, with Bank of America requiring the most, at $33.9 billion. The government tests also indicate that Wells Fargo needs to raise capital by $13.7 billion, Citigroup by $5.5 billion, Fifth Third Bancorp by $1.1 billion, GMAC by $11.5 billion, Keycorp by $1.8 billion, SunTrust Banks by $2.2 billion, Regions Financial Corp. by $2.5 billion, Morgan Stanley by $1.8 billion and PNC Financial Services Group Inc. by $600 million. Among those in the clear are JP Morgan Chase, Goldman Sachs, BB&T Corp., MetLife and State Street. "While we have some good news today, credit losses in banks are likely to increase in the coming months across all asset classes," says Comptroller of the Currency John C. Dugan. "Supervisors are very focused on this concern. Banks will need strong capital to weather these losses while continuing to make loans to creditworthy borrowers – which is exactly what the stress test is designed to ensure." Federal Reserve Chair Ben Bernanke adds that the results should provide "considerable comfort" to investors and the public. "The examiners found that nearly all the banks that were evaluated have enough Tier 1 capital to absorb the higher losses envisioned under the hypothetical adverse scenario," he says. Roughly half the firms, though, need to enhance their capital structure to put greater emphasis on common equityâ�¦ Many of the institutions have already taken actions to bolster their capital buffers and are well-positioned to raise capital from private sources over the next six months." SOURCE: FinancialStabil

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