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Ten US banks require $75bn to cover future losses

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by Kay Mitchell
”Ten

Following the recent stress tests on 19 US banks, it has now been revealed that ten of the banks require a total of $74.6 billion (£50 billion) in extra capital to cover future losses.

The stress tests were conducted by the Federal Reserve to establish which financial institutions are in a position to weather the downturn.

While it was unveiled yesterday that none of the banks were at risk of insolvency, the Fed has now revealed that Wells Fargo requires $13.7 billion, while GMAC (the financial division of General Motors) requires $11.5 billion.

An additional $5.5 billion of funds is required by Citigroup, while Morgan Stanley needs $1.8 billion. Regions Financial, SunTrust Banks, KeyCorp, Fifth Third Bancorp and PNC Financial Services require $2.5 billion, $2.2 billion, $1.8 billion, $1.1 billion and $600 million respectively.

However, the most at risk is Bank of America (BoA) requiring an additional $33.9 billion. BoA, along with Citigroup, have already received a combined $65 billion from the taxpayer.

With regard to raising capital, US Treasury Secretary Timothy Geithner, said the majority of the banks should be able to raise money from private sources , however, if they are unable to do so, the Government may have to inject further taxpayer money into the banks.

The banks that require additional capital have a deadline of 8 June to finalise their plans to do so and seek regulatory approval.

JPMorgan Chase, Goldman Sachs, Bank of New York Mellon, State Street, American Express and Capital One do not need extra funds after receiving clean bills of health.

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News posted: May 8, 2009

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