Bank stress test results leaked

U.S. government stress tests are expected to show that nearly a dozen of the largest U.S. banks do not have enough money to survive if the economy worsens and will need to raise billions of dollars as a precaution.

People stand outside of the Federal Reserve Bank of Chicago building

WASHINGTON — U.S. government stress tests are expected to show that nearly a dozen of the largest U.S. banks do not have enough money to survive if the economy worsens and will need to raise billions of dollars as a precaution.

Findings of the government’s long-awaited tests of 19 banks leaked out Wednesday, a day ahead of an official announcement.

Investors cheered reports that American Express, JPMorgan Chase and Bank of New York Mellon have enough capital to endure and even pushed up the stocks of banks that may need more capital.

But the public nature of the assessments also raised questions among some critics about whether the findings will reflect the banks’ actual conditions.

The tests put banks through two scenarios: one that reflected expectations about the current recession and another that envisioned a recession deeper than what analysts predict.

Citigroup Inc. will need to raise about US$5 billion, according to a government official briefed on the results. Regions Financial Corp. will also need to raise more money, as will Bank of America Corp. and Wells Fargo & Co.

Stress tests have long been a part of the bank regulation system. They help regulators decide how to supervise banks and help banks decide how to limit their risk. Those conversations between banks and regulators normally take place behind closed doors.

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