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Bank of America faces 35-billion-dollar gap, report says - Summary

New York - Bank of America Corp and Wells Fargo & Co are among the banks that will need to raise billions of dollars more in capital, according to a regulatory review of the country's top 19 banks that is due to be released Thursday, US media reporte...
Posted : Wed, 06 May 2009 17:11:42 GMT
By : DPA
Category : US (Business)
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New York - Bank of America Corp and Wells Fargo & Co are among the banks that will need to raise billions of dollars more in capital, according to a regulatory review of the country's top 19 banks that is due to be released Thursday, US media reported. Bank of America faces a 34-billion-dollar capital shortfall and Wells Fargo needs another 15 billion dollars, Bloomberg financial news agency reported Wednesday, quoting sources familiar with the situation.

Altogether, 10 of the 19 banks are expected to face demands to increase their capital levels. Major banks including JPMorgan Chase & Co and Goldman Sachs Group Inc have passed the government's stress tests, which are designed to check whether banks have enough resources to survive another dip in the US economy.

The US Federal Reserve is due to release the results of the long- awaited bank stress tests on Thursday after the US markets close. President Barack Obama launched the stress tests in February to get a better sense of how banks were managing the current financial crisis.

Banks found with a capital shortfall will have to rectify the situation within six months. Further cash infusions for stressed banks could come from the government or the capital markets but more likely from more conversions of shares to common stock.

The 19 banks in the stress test were selected for having more than 100 billion dollars in assets. Together, they hold two-thirds of the assets and more than half of the loans in the US banking system.

Under the plan, banks found short of capital could be forced to sell ownership stakes to the US government. In Bank of America's case, this could make the government one of the bank's largest shareholders.

Bank of America already received 45 billion dollars in capital from the federal government, some of it to help cover losses arising form the takeover of the investment bank Merrill Lynch and Co. Wells Fargo has taken 25 billion dollars.

The administration has said about 100 billion dollars are still left over from a 700-billion-dollar financial rescue package approved by Congress in October.

Copyright DPA

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