Big-bank ‘stress test’ results to be released May 4
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Mark it on your calendar -- but use a pencil, in case the government changes its mind again: The ‘stress test’ results for the 19 biggest banks will be released on May 4, Bloomberg News reports, citing an unnamed Federal Reserve official.
From Bloomberg:
The regulators also plan to publish a paper on their methods on April 24, in an effort to bolster credibility of the process, according to the official, who spoke on condition of anonymity. The results will include any plans for boosting capital to weather a deeper economic downturn, the person said. Procedures for releasing information on specific firms, which will expose weaker banks and boost confidence in stronger ones, are still under discussion. Bank regulators may also encourage each of the 19 firms to release an individual statement on the results of its own stress test, another person familiar with the matter said yesterday.
The idea behind the stress test was to identify which major banks would need to raise more capital to withstand a worse-than-expected surge in loan losses because of the recession. Banks that come up short, in their regulators’ eyes, would either have to raise more capital from private investors or take more government money (with all the attendant strings attached).
It still isn’t clear how much detail the government will release on the tests or how much they’ll allow individual banks to say. As with so much of the financial-system rescue, regulators seem to be making this stuff up as they go along.
The obvious risk is that the test results will create a two-tiered banking system -- the haves and the have-nots -- which could wreak more havoc on the stocks of the have-nots.
-- Tom Petruno