Results of “Stress Test” for US BANKS

The federal government ordered 10 of the 19 largest U.S. banks to raise a combined $74.6 billion in capital to cushion themselves against worse than expected losses. The much-anticipated stress-test results unleashed a scramble by the weakest banks to find money and a push by the strongest ones to escape the government shadow of taxpayer-funded rescues. The government’s tests measured potential losses on mortgages, commercial loans, securities and other assets held by the stress-tested banks, ranging from giants Bank of America Corp. and Citigroup Inc. to regional institutions such as SunTrust Banks Inc. and Fifth Third Bancorp.

Experts warn that the tests could have a serious unintended consequence: Loans could be harder to come by for consumers and businesses. That’s because the government’s intense focus on thicker capital cushions might prompt banks to hoard cash and further curtail lending.

Source: Wall Street Journal

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