US stress tests conclude 10 banks need more capital

8 May 2009

The US government's stress tests of the country's 19 largest financial institutions have concluded that 10 of the firms need almost $75 billion in fresh capital to ensure their survival in a severe recession.

Banks were tested by the Federal Reserve, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation.

In their worst case economic scenario, losses at the 19 banks in 2009 and 2010 could be $600 billion. Approximately $455 billion of these losses would be related to loans, particularly residential mortgages and other consumer-related lending.

Estimated losses from trading-related exposures and securities would be $135 billion in the most severe scenario.

Nine of the banks - American Express, BB&T, Bank of New York Mellon, Capital One, Goldman Sachs, JPMorgan Chase, MetLife, State Street and US Bancorp - had sufficient capital buffers to absorb their share of the losses.

Of the ten that would require additional capital, Bank of America needed the most at $33.9 billion. Wells Fargo needed $13.7 billion, GMAC needed $11.5 billion and Citigroup needed $5.5 billion.

Others in need of fresh capital included KeyCorp, Fifth Third Bancorp, Morgan Stanley, PNC Financial Services, Regions Financial Corporation and SunTrust Banks.

Become a bobsguide member to access the following

1. Unrestricted access to bobsguide
2. Send a proposal request
3. Insights delivered daily to your inbox
4. Career development