One of the bits of information that Wall Street and others has been waiting for has been the release of the results of bank stress tests. These stress tests were performed by the Treasury and then analyzed. Now the results of stress tests on 19 banks are about to be released. Preliminary results suggest that six of these banks need more capital.
Two of the bank names have already been released: Bank of America and Citi. The reason we’re hearing about these banks is due to the fact that they are appealing the results of the stress tests to the Federal Reserve.
But where will this capitalization money come from? Bloomberg reports on how banks are expected to raise the capital they need:
While some of the lenders may need extra cash injections from the government, most of the capital is likely to come from converting preferred shares to common equity, the people said.
Contrary to the belief of some, releasing stress test results thus far hasn’t negatively impacted the stock market. In fact, U.S. stocks are rallying today.
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