Bank Regulators Seek Capital for More BanksPreliminary results of the government's stress test of the top 19 banks show that four other banks could be added to a roster of financial institutions needing to raise extra capital, a list that includes Bank of America and Citigroup.
Some of the money may come from cash injections from the government, but most of it will likely derive from converting preferred shares to common equity, say sources familiar with the topic. The Federal Reserve is holding appeal hearings from banks, including Citigroup and Bank of America, which regulators have determined need more capital reserves.
By pushing stock conversions, rather than federal assistance, the government is letting banks buoy themselves higher without the stain of political involvement that have turned public opinion against the bailouts. The second part of the test results are due May 4. Banking regulators are mulling over how much of the results to make public.
Banks getting more assistance from the government may be held to tighter controls by government, ranging from increased oversight of executives or boards of directors to dismissal of bank officials. Bank of America's CEO Kenneth Lewis faces a shareholder vote Wednesday that will decide whether he will be re-elected as the bank's chairman of the board. During Lewis' tenure as CEO, Bank of America has received $45 billion in government aid.
Along with Bank of America and Citigroup, some regional banks are likely to need additional capital. SunTrust Bank, KeyCorp and Regions Financial Corp. are the banks that are on the short list that may need additional capital, according to an April 24 analysis by Morgan Stanley.