About 10 Banks Must Boost Capital: Reports

The U.S. government is expected to direct about 10 of the 19 banks undergoing stress tests to boost their capital, reports say.

Author:: Joseph Woelfel
Publish date:: May 5, 2009 10:52 AM EDT

The U.S. government is expected to direct about 10 of the 19 banks undergoing stress tests to boost their capital, reports say.

Updated from 12:26 a.m. EDT

The U.S. is expected to direct about 10 of the 19 banks undergoing government stress tests to boost their capital, according to published reports.

The exact number of banks affected remains under discussion. It could include

Wells Fargo

(WFC) - Get Report

Bank of America

(BAC) - Get Report

Citigroup

and several regional banks, the

Wall Street Journal

reports, citing several people familiar with the matter. The newspaper reports officials at one point believed as many as 14 banks would need to raise more funds to create a stronger buffer against future losses, but that number has fallen in recent days.

Representatives from the banks declined to comment for the

Journal

Despite the reports, bank stocks were flat Tuesday morning. The NYSE Financial Sector Index was down 12 points. BofA shares were up 2.7% to $10.66 and Citi stock was rising 4.7% to $3.35. Wells Fargo shares were off 3.8% to $23.32.

An initial stress test identified Wells Fargo as among the banks needing a bigger buffer, the

Journal

reports, citing a person close to the company. It is unclear whether Wells would be forced to raise fresh capital or if regulators would accept the bank's argument that it can earn its way through the losses in future years, according to the newspaper.

The banks are expected to be briefed on the official results of the stress tests on Tuesday. The

Federal Reserve

and Treasury Department also will tell them how policymakers plan to publicly unveil the market-sensitive results,

Reuters

reports, citing a source. The Fed and Treasury declined to comment for

Reuters

on how many banks will be directed to raise more capital.

Reports on Monday had Bank of America and Citigroup each working to raise $10 billion in fresh capital to plug in balance-sheet gaps determined by regulators. Bank of America denied the reports.

Last week, the government pushed back its expected release date of the stress test results to Thursday from Monday, as regulators negotiate with the banks over the findings.