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US financial regulators vow to put extra funds into banks
By Rebecca Christie |
February 24, 2009, Tuesday
|
Print Edition
Print Edition
UNITED States financial regulators pledged to inject additional funds into the nation's major banks to prevent their collapse and will this week begin examinations to determine if they have enough capital.
"The government will ensure that banks have the capital and liquidity they need to provide the credit necessary to restore economic growth," the Treasury and other regulators said in a joint statement in Washington yesterday. "The US government stands firmly behind the banking system during this period of financial strain."
Banks that need additional funds after the so-called stress tests and cannot raise the money from private investors will be able to tap additional taxpayer money, the regulators said. Government funds would be in the form of "mandatory convertible preferred shares" that would be exchanged into common equity "only as needed."
Stakes that the Treasury has already bought in lenders, such as Citigroup Inc and Bank of America Corp, will also be eligible to be changed to convertible preferred shares. The new funds are designed to provide a "temporary" buffer for firms against increased losses during the crisis, Bloomberg News said.
Supervisors will start the stress tests tomorrow to assess whether banks have enough capital to withstand "a more challenging economic environment."
The statement was a joint release of the Treasury, Federal Reserve, Federal Deposit Insurance Corp, Office of the Comptroller of the Currency and Office of Thrift Supervision.
The regulators said major US banks are currently meeting their existing capital requirements.
"Major US banking institutions have capital in excess of the amounts required to be considered well capitalized," the regulators said. "This program is designed to ensure that these major banking institutions have sufficient capital to perform their critical role in our financial system on an ongoing basis and can support economic recovery."
"The government will ensure that banks have the capital and liquidity they need to provide the credit necessary to restore economic growth," the Treasury and other regulators said in a joint statement in Washington yesterday. "The US government stands firmly behind the banking system during this period of financial strain."
Banks that need additional funds after the so-called stress tests and cannot raise the money from private investors will be able to tap additional taxpayer money, the regulators said. Government funds would be in the form of "mandatory convertible preferred shares" that would be exchanged into common equity "only as needed."
Stakes that the Treasury has already bought in lenders, such as Citigroup Inc and Bank of America Corp, will also be eligible to be changed to convertible preferred shares. The new funds are designed to provide a "temporary" buffer for firms against increased losses during the crisis, Bloomberg News said.
Supervisors will start the stress tests tomorrow to assess whether banks have enough capital to withstand "a more challenging economic environment."
The statement was a joint release of the Treasury, Federal Reserve, Federal Deposit Insurance Corp, Office of the Comptroller of the Currency and Office of Thrift Supervision.
The regulators said major US banks are currently meeting their existing capital requirements.
"Major US banking institutions have capital in excess of the amounts required to be considered well capitalized," the regulators said. "This program is designed to ensure that these major banking institutions have sufficient capital to perform their critical role in our financial system on an ongoing basis and can support economic recovery."
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