Fed says bank capital plans to be sufficient

By AFP

July 15, 2010 Updated Jun 8, 2009 at 6:01 PM CDT

The Federal Reserve said Monday the 10 major US banks ordered to raise new capital following "stress tests" have developed sufficient programs to shore up their finances.

But the central bank did not provide a green light to any individual banks to repay the government for capital injections, as some institutions had sought.

"The 10 banking organizations required ...to bolster their capital buffers have all submitted capital plans that, if implemented, would provide sufficient capital to meet the required buffer under the assessment's more-adverse scenario," the Fed said in a statement.

"As supervisors, we will be working with the institutions to ensure their plans are implemented quickly and effectively."

Some reports had said a few of the banks of the 19 subjected to stress tests could have gotten quick approval to repay capital. Some banks are hoping to repay the government by the end of June.

A number of major banks including Goldman Sachs, Morgan Stanley, Bank of America and others have said they would seek early reimbursement of the capital aid injections that began last year to shore up a financial system reeling from a housing meltdown and economic slump.

The Fed said that any banking organization must first obtain approval from regulators, which would make a recommendation to the Treasury Department.

The banks "must demonstrate an ability to access the long-term debt markets" without government guarantees "and must successfully demonstrate access to public equity markets," the Fed said last week.

The firms must meet other requirements and "must have a robust longer-term capital assessment" and be able to maintain "a prudent level and composition of capital" to function as a lender, the Fed said.

Some banks had argued that the capital program was forced on them and imposed conditions such as limits on executive compensation, and raised fears about government meddling in bank operations.

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