After much buzz and some controversy, federal regulators released the findings of the bank stress tests Thursday afternoon. In total, 10 institutions need $75 billion in common equity to make up for existing shortfalls in capital reserves. Leading the list of those lacking in funds is Bank of America, who officials have told to raise $33.9 billion, followed by Wells Fargo, who needs $13.7 billion, and GMAC, in need of $11.5 billion.

Following are the buffer assessments required of each institution evaluated:

- American Express Co. -- no need
- Bank of America Corp. -- $33.9 billion
- BB&T Corp. -- no need
- Bank of NY Mellon Corp. -- no need
- Capital One Financial Corp. -- no need
- Citigroup -- $5.5 billion
- Fifth Third Bancorp -- $1.1 billion
- GMAC LLC -- $11.5 billion
- Goldman Sachs Group -- no need
- J.P. Morgan Chase & Co. -- no need
- Keycorp -- $1.8 billion
- MetLife -- no need
- Morgan Stanley -- $1.8 billion
- PNC Financial Services Group -- $600 million
- Regions Financial Corp. -- $2.5 billion
- State Street Corp. -- no need
- SunTrust Banks Inc. -- $2.2 billion
- US Bancorp -- no need
- Wells Fargo & Co. -- $13.7 billion


Regulators from the Federal Reserve, the Office of Thrift Supervision, and the FDIC conducted what they called “unprecedented” exams of the financial conditions of the nation's 19 largest institutions, which hold two-thirds of the country's assets and finance half of the loans. Using a “what-if” scenario, officials looked at whether the banks could continue normal operations and maintain lending levels if the economy shrunk by another 10 percent and housing prices dropped 25 percent more.

The public's confidence in the nation's financial system has waned with its continuing deterioration. And regulators hope their stress test initiative will lift the fog of uncertainty over bank balance sheets and help to assure the markets and taxpayers that the major banks, individually and collectively, have the capital to continue lending even in a worse than expected recession.

According to Treasury Secretary Timothy Geithner, the results paint a “reassuring” picture that the U.S. banking system can withstand the stresses of a worsening economy once 10 of the 19 boost their capital reserves.

Those banks that need additional cash will have six months to accumulate the mandated cushion from private sources by selling assets or stock or converting existing securities. If unable to pull together the funds in that time, they will be forced to accept another capital injection from the government in exchange for a percentage of ownership in the form of preferred shares.

Officials said that some banks are in a strong enough position to finance themselves, and these institutions can begin repaying the government the bailout dollars they've already received. The Treasury said it expects banks to repay more than the $25 billion initially estimated, which will free up federal resources to help support community banks, encourage small-business lending, and restart the securities markets.

To further support smaller, community-based institutions, the Treasury said it will continue to ensure there is continuity of access to the government's recovery programs and is also extending the applications deadline for its Capital Purchase Program.

Carrie Bay | 05.07.09 www.dsnews.com