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Wednesday, April 22, 2009

Stress Test: Capital Needs May be Disclosed

by Calculated Risk on 4/22/2009 06:53:00 PM

From Bloomberg: U.S. May Reveal Each Bank’s Capital Needs After Tests

The Obama administration may direct banks that are judged to be short of capital after stress tests to disclose how they are going to get additional funds when the government reveals the results on May 4, according to a person familiar with the matter.

The government would release a bank-by-bank assessment, while the lenders would say how they plan to shore up their finances ...

Regulators conducting the stress tests are increasingly focusing on the quality of loans banks made after finding wide variations in underwriting standards...
It only makes sense for banks short of capital to explain how they will raise the additional funds. The answer will probably be more money from the TARP!

On the variations in quality of loans, just look at the DataQuick delinquency report earlier today - even when you account for subprime vs. prime lenders, there was a clearly a wide disparity in underwriting standards. Hopefully this wasn't a surprise to the regulators.