This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration. Need a new registration confirmation email? Click here
The stress test results rolled in after the market's close on Thursday, confirming reports that the country's 19 biggest financial institutions will need to raise $75 billion as a buffer against loan losses through the remainder of the economic downturn.
Under what regulators characterized as a "deliberately stringent test," losses at the 19 firms from 2009 to 2010 could reach $600 billion, according to the
Federal Reserve. Most of those losses would come from residential real estate and other consumer loans. Those losses would represent 9.1% of the banks' loan books, a higher loan-loss ratio than the historical peak of the 1930s depression.
"The assessment announced today will help strengthen the lending capacity of banks, with greater transparency and actions to reinforce the amount of capital banks hold against the risk of future losses," Treasury Secretary Tim Geithner said in a statement.
Of the banks that were tested,
Bank of America(BAC - Get Report) required the biggest infusion, of $33.9 billion, followed by
Wells Fargo(WFC - Get Report) with $13.7 billion;
General Motors'(GM) GMAC financing arm, with $11.5 billion; and
Citigroup(C - Get Report) with $5.5 billion.
Regions Financial(RF) will need $2.5 billion in fresh funding, according to the test results, while
SunTrust(STI) will need $2.2 billion; both
Morgan Stanley(MS - Get Report) and
KeyCorp(KEY) will need $1.8 billion;
Fifth Third(FITB) will need $1.1 billion; and
PNC Financial(PNC) will need $600 million.
Just before the test results were released, Wells Fargo announced a $6 billion common stock offering and Morgan Stanley followed up with an announcement that it will raise $5 billion in stock and debt. Citi announced that it would raise $5.5 billion by converting some of the government's existing preferred stake into common equity.