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Fed Finds 10 U.S. Banks Need Total Capital of $74.6 Billion 
http://www.bloomberg.com/apps/news?pid=20601087&sid=ai4UCrdLwf2Q&refer=home#
By Craig Torres
May 7 (Bloomberg) -- The Federal Reserve determined that 10 U.S. banks need to raise a total of $74.6 billion in capital, concluding its unprecedented probe of the health of the nation’s 19 largest lenders.
The results showed that losses at the banks under ‘more adverse” economic conditions than most economists anticipate could total $599.2 billion over two years
. Mortgage losses present the biggest part of the risk, at $185.5 billion. Trading accounts were the second-largest vulnerability, with potential losses of $99.3 billion. 
For some banks, today’s results open an exit
from a tense partnership between Wall Street and the government. Others will have six months to fill their capital shortfalls, and may be forced to accept expanded federal ownership that could prompt changes in their management.
“The results released today should provide considerable comfort to investors and the public,”
Fed Chairman Ben S. Bernanke said in a statement. “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.”
Almost half of the banks “need to enhance their capital structure to put greater emphasis on common equity,” the Fed chief said.
Financial Regulation
The reviews showed that supervisors can work together to make rapid assessments about risks embedded in the U.S. financial system, as lawmakers and the Obama administration consider an overhaul in regulations later this year. Bernanke and other agency heads insisted on transparency, overcoming the tendency of supervisors within their institutions to avoid public disclosure.
After an internal debate, the regulators decided to publish firm-specific results themselves, rather than risk letting private accountants and lawyers manage the outcome.
Bank of America Corp. was judged to need $33.9 billion in additional capital under regulators’ criteria. Wells Fargo & Co.’s shortfall is $13.7 billion, while Citigroup Inc.’s gap is $5.5 billion. New York-based Citigroup has already announced plans to bolster its tangible common equity ratio by converting some of its preferred shares into common stock.
Capital Needs
Fifth Third Bancorp’s capital need is $1.1 billion, KeyCorp’s is $1.8 billion, PNC Financial Services Group Inc.’s is $600 million, Regions Financial Corp.’s is $2.5 billion and SunTrust Banks Inc.’s is $2.2 billion. GMAC LLC needs $11.5 billion, while Morgan Stanley’s assessment was $1.8 billion.
Goldman Sachs Group Inc., JPMorgan Chase & Co., Bank of New York Mellon Corp., MetLife Inc., American Express, State Street Corp., BB&T Corp., US Bancorp and Capital One Financial Corp. were deemed not to need additional funds, according to the results.
Residential mortgages and consumer loans, including credit cards, “account for $322 billion, or 70 percent of the loan losses projected under the more adverse scenario,” the Fed said in its report.
Banks that need to raise capital under the government’s stress tests will have until June 8 to develop a plan and until Nov. 9 to implement it.
“The doomsday predictions in January and February that banks were insolvent is just wrong,” David Trone, senior analyst at Fox-Pitt Kelton Cochran Caronia Waller, said before the announcement. The tests “did succeed and genuinely stressing the banks and I think that would give confidence to people.”
The capital buffer for each bank “is sized to achieve a Tier 1 risk‐based ratio of at least 6 percent and a Tier 1 common risk‐based ratio of at least 4 percent at the end of 2010, under a more adverse macroeconomic scenario than is currently anticipated,” the regulators said.
The total loss rate for loans calculated by the regulators was 9.1 percent, a level that exceeded that seen in the 1930s, the Fed said.
To contact the reporter on this story: Craig Torres in Washington at [email protected]
http://www.bloomberg.com/apps/news?pid=20601087&sid=ai4UCrdLwf2Q&refer=home#
By Craig Torres
May 7 (Bloomberg) -- The Federal Reserve determined that 10 U.S. banks need to raise a total of $74.6 billion in capital, concluding its unprecedented probe of the health of the nation’s 19 largest lenders.
The results showed that losses at the banks under ‘more adverse” economic conditions than most economists anticipate could total $599.2 billion over two years
. Mortgage losses present the biggest part of the risk, at $185.5 billion. Trading accounts were the second-largest vulnerability, with potential losses of $99.3 billion. For some banks, today’s results open an exit
from a tense partnership between Wall Street and the government. Others will have six months to fill their capital shortfalls, and may be forced to accept expanded federal ownership that could prompt changes in their management. “The results released today should provide considerable comfort to investors and the public,”
Fed Chairman Ben S. Bernanke said in a statement. “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.” Almost half of the banks “need to enhance their capital structure to put greater emphasis on common equity,” the Fed chief said.
Financial Regulation
The reviews showed that supervisors can work together to make rapid assessments about risks embedded in the U.S. financial system, as lawmakers and the Obama administration consider an overhaul in regulations later this year. Bernanke and other agency heads insisted on transparency, overcoming the tendency of supervisors within their institutions to avoid public disclosure.
After an internal debate, the regulators decided to publish firm-specific results themselves, rather than risk letting private accountants and lawyers manage the outcome.
Bank of America Corp. was judged to need $33.9 billion in additional capital under regulators’ criteria. Wells Fargo & Co.’s shortfall is $13.7 billion, while Citigroup Inc.’s gap is $5.5 billion. New York-based Citigroup has already announced plans to bolster its tangible common equity ratio by converting some of its preferred shares into common stock.
Capital Needs
Fifth Third Bancorp’s capital need is $1.1 billion, KeyCorp’s is $1.8 billion, PNC Financial Services Group Inc.’s is $600 million, Regions Financial Corp.’s is $2.5 billion and SunTrust Banks Inc.’s is $2.2 billion. GMAC LLC needs $11.5 billion, while Morgan Stanley’s assessment was $1.8 billion.
Goldman Sachs Group Inc., JPMorgan Chase & Co., Bank of New York Mellon Corp., MetLife Inc., American Express, State Street Corp., BB&T Corp., US Bancorp and Capital One Financial Corp. were deemed not to need additional funds, according to the results.
Residential mortgages and consumer loans, including credit cards, “account for $322 billion, or 70 percent of the loan losses projected under the more adverse scenario,” the Fed said in its report.
Banks that need to raise capital under the government’s stress tests will have until June 8 to develop a plan and until Nov. 9 to implement it.
“The doomsday predictions in January and February that banks were insolvent is just wrong,” David Trone, senior analyst at Fox-Pitt Kelton Cochran Caronia Waller, said before the announcement. The tests “did succeed and genuinely stressing the banks and I think that would give confidence to people.”
The capital buffer for each bank “is sized to achieve a Tier 1 risk‐based ratio of at least 6 percent and a Tier 1 common risk‐based ratio of at least 4 percent at the end of 2010, under a more adverse macroeconomic scenario than is currently anticipated,” the regulators said.
The total loss rate for loans calculated by the regulators was 9.1 percent, a level that exceeded that seen in the 1930s, the Fed said.
To contact the reporter on this story: Craig Torres in Washington at [email protected]
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