Citi, Bank of America told to boost capital: report

28 April 2009

US regulators have told Citigroup and Bank of America that they both must raise billions of dollars of extra capital, a report based on leads from the recent stress tests suggests.

The stress tests on the banks undertaken by the US government recently found that both Citigroup Inc and Bank of America Corporation may need to raise more capital, The Wall Street Journal reported.

Besides Citigroup and Bank of America, the Journal said, the US government conducted stress tests on 17 other major banks and preliminary results suggest the financial crisis may last longer than expected.

The stress tests were meant to identify individual strengths of the financial institutions and to see how well are they positioned to ride out the slump.

The final results of the stress tests are due to be published next week. In the meantime, the Federal Reserve has asked banks to estimate their losses based on several economic scenarios, in which GDP, unemployment and house prices fell by varying amounts.

Banks that have been asked to raise more capital after the stress tests are unlikely to be declared insolvent, according to WSJ. Both Citi and Bank of America are also under heavy pressure from shareholders to shore up finances.