10 US banks fail ‘stress test’, need $75bn

WASHINGTON: Government “stress tests” of the US financial industry found that 10 of the 19 largest banks need a combined $75 billion to weather the continuing recession, US regulators said on Thursday.

Treasury Secretary Timothy Geithner said that much of the extra capital could be raised from private investors, and many banks would be able to meet the government’s demands by simply converting preferred shares into common equity. The capital shortages revealed by the stress test review, which was designed to check whether banks have enough resources to survive another dip in the US economy, were lower than many outside analysts had expected.

Bank of America Corp faces the largest task, needing to raise $33.9 billion in extra

capital. That may force the bank to make the government a major stakeholder in exchange for extra support. Geithner did not rule out management changes.