The nation’s 19 largest banks began receiving results Friday of “stress tests” designed by federal regulators to gauge how they’d perform if the economy sinks further than projected. Several of the banks are widely expected to be ordered to raise more capital or face the prospect of partial government ownership.

The results of the stress tests won’t be released until May 4. Even then it’s not clear just how much detail of their balance sheets will be revealed. However, the Federal Reserve on Friday laid out the methodology used in the tests, which began in February for bank holding companies with assets that exceed $100 billion.

Regulators put the banks under a gag order, giving them a week privately to challenge the findings and the required buffer of additional capital they’ll need to raise from the private sector, accounting maneuvers or additional government support.

In a briefing for journalists, given on the condition of anonymity because results haven’t been released, senior Fed officials hinted that several banks are being told to raise more capital as a buffer against the possibility of a deeper economic decline.

That will help banks survive what are expected to be mounting losses on their residential and commercial mortgage holdings, as well as deterioration of other assets.

Source/Full Story::  San Luis Obispo

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