Stress Tests Identify 10 of 19 Banks in Need of New Capital

About 10 of the 19 largest U.S. banks being stress tested are expected to boost their capital…a move that officials hope will diminish fears about the solvency and the viability of the financial sector, The Wall Street Journal reported late Monday night, citing sources familiar with official talks.

From WSJ: The exact number of banks affected remains under discussion…At one point, officials believed as many as 14 banks would need to raise more funds to create a stronger buffer against future losses…but that number has fallen in recent days.

Several banks are expected to already have enough capital to weather a worsening economy, including Goldman Sachs and J.P. Morgan Chase & Co. J.P. Morgan Chairman and Chief Executive James Dimon expressed confidence Monday that the banking system can withstand losses from the recession, even though it will take years for the industry to recover.

“The banking system can handle an awful lot of stress and be OK,” he said in a Monday conference call…

An initial stress test identified Wells Fargo as among the banks needing a bigger buffer, said a person close to the company. It is unclear whether Wells would be forced to raise fresh capital or if regulators would accept the bank’s argument that it can earn its way through the losses in future years. Wells expects more clarity Tuesday.

The Fed plans to release the results of the stress tests on Thursday after markets hours.

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