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Fed stress tests reveals US banks not at risk of insolvency

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by Kay Mitchell

Following the recent stress tests on 19 US banks, carried out to establish which financial institutions are in a position to weather the downturn, the Federal Reserve has revealed that no US banks are at risk of insolvency.

However, the results have revealed that tens of billions of dollars are needed to strengthen balance sheets at several of the country‘s banks, with Citigroup and Bank of America having to raise the largest amount of extra capital to cover future losses.

In a television interview with the Charlie Rose Show, Timothy Geithner, Treasury Secretary, said: “We brought the nation’s financial supervisors together, and in an unprecedented step, asked them to do a careful look under the hood, to take a careful look at how much - how strong these institutions were in the event things got worse.”

Mr Geithner added that “None of the 19 banks are at risk for insolvency”, it is hoped the results will boost confidence in the banking system.

With regard to raising capital, Mr 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.

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News posted: May 7, 2009

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