Stress tests to confirm tomorrow that main banks need to expand capital to overcome the crisis
| Date: May 6, 2009 | Source: Sources |
| Category: Economy | |
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Loading ... The U.S. government has informed Bank of America (BofA) that needs to raise new capital amounting to 33,900 million (25,470 million euros) to address potential worsening of economic conditions, according to the newspaper 'The New York Times , citing sources of the entity.
Thus, BofA would be the entity that would need to capture a greater volume of capital among the 19 banks that have undergone stress tests by U.S. regulators.
If the entity was unable to obtain this additional capital from private investors by selling assets or stock of the Government should seek assistance through the program Troubled Asset Relief (TARP), which has already received 45,000 million dollars (33.784 million euros).
Also, the newspaper notes that BofA could cover almost all of this expansion by converting preferred shares held by the government for common shares of the bank, although this measure would make the state one of the main shareholders of BofA.
Thus, the entity's executives have held discussions with government officials over the amount of capital needed by the bank, since the figure is higher than expected.
However, the administrative officer of the entity, J. Steele Alphin, said that Bank of America has several options to raise additional capital on their own before opting for the conversion of shares held by the Government.
BofA's reluctance contrasted with the decision of Citigroup, which has already agreed to the conversion of preferred shares for common stock of the Government of the bank.
Therefore, Citigroup will need less capital to capture between 5,000 and 10,000 million dollars (3756 and 7.513 million euros), according to sources familiar with the situation, although the 'mattress' recommended capitalization is between 50,000 and 55,000 million dollars (37 558 and 41.314 million euros).
The results of stress tests will be published tomorrow and is expected that about 10 of the 19 banks tested received the recommendation to expand capital.
On yesterday, the president of the U.S. Federal Reserve (Fed), Ben S. Bernanke said that these entities must submit a plan to meet new capital requirements that must be applied within six months.
