 Geithner: Most of top 19 US banks have enough capital
(China Daily)
Updated: 2009-04-23 07:46 Treasury Secretary Timothy Geithner indicated stress tests will show most of the 19 biggest US banks have enough capital and said those requiring further funds may get a mix of converted government preference shares and private money. The Treasury chief, testifying at a congressional oversight panel Tuesday, said each bank needing aid after the tests would work with supervisors on the options, including tapping the $700 billion Troubled Asset Relief Program. Geithner repeatedly said regulators, not the Treasury, are taking the lead on the exams. The remarks helped ease investors' concerns about the results of the reviews, including the risk of political interference and the prospect for stock dilutions among the 19 banks under scrutiny. Financial shares jumped, sending benchmark indexes up the most in almost two weeks. "Geithner wouldn't have said what he said" at the hearing "if he were really concerned about the outcome" of the tests, said Mark Bronzo, a money manager at Security Global Investors. Banks may get preliminary results from the tests on April 24, the same day the Federal Reserve is expected to release the methodology of the assessments, people briefed on the matter have said. While final results are scheduled for May 4, regulators have yet to agree on how they will be published. In their reviews, regulators will also determine when the healthiest banks can pay the government back, Geithner said. Included in that decision will be ensuring that there's sufficient capital in the system to foster an economic recovery, he added. "Where there is a need for additional capital, total capital and common capital, then those banks will have a series of options for how they meet that need, and they'll work out with their primary supervisors what's the best mix of those options," the secretary said. By converting existing government preference shares to common equity, a bank would cut its interest payments to the Treasury, bolstering its capital. The Federal Reserve is leading the assessments, which are designed to ensure that firms have enough capital to weather a deeper economic downturn over the coming two years. In his prepared statement for the oversight hearing, Geithner said "the vast majority of banks have more capital than they need to be considered well capitalized by their regulators". Kirk Hartman, who helps oversee about $400 billion as chief investment officer at Wells Capital Management in Minneapolis, said: "We need to see more details on this, but those are constructive comments." Geithner also cited signs of "thawing" in credit markets and some indication confidence was beginning to return. Regulators conducting the stress tests are increasingly focusing on the quality of loans banks made after finding wide variations in underwriting standards, a regulatory official said earlier this week. They concluded that banks' lending practices need to be given as much weight as macroeconomic scenarios in determining the health of each bank, the person said. The administration intends in coming weeks to release guidelines on compensation limits. The new regulations will be effective immediately. Bloomberg News
 (China Daily 04/23/2009 page17) |
