Bernanke upbeat on U.S. banking sector as ECB lowers rate for recession

BEIJING, May 8 (Xinhua) -- U.S. Federal Reserve Chairman Ben Bernanke Thursday expressed confidence on the country's banking sector while the European central banks (ECB) cut its key interest rate to a record low to combat the recession.

Nearly all the banks have sufficient capital "to
absorb the higher losses envisioned under the hypothetical adverse scenario,"
Bernanke said after the U.S. regulators unveiled results of the government's
stress tests.

The long-awaited results "should provide considerable
comfort to investors and the public," he said.

The assessment results are "just one important
element of the government's broader and ongoing efforts to strengthen the
financial system and the economy," said the U.S. central bank chief in a
statement.

Nevertheless, Bernanke urged 10 of the nation's 19
largest banks to raise about 75 billion U.S. dollars in new capital to withstand
future losses if the recession worsened.

"Roughly half the firms, though, need to enhance
their capital structure to put greater emphasis on common equity, which provides
institutions with the best protection during periods of stress," he said.

The United States recently has seen tentative signs
of recovery thanks to a series of stimulus measures, and observers have pointed
to possible bottom-out for the U.S. economy by the end of this year.

Many of the observers have pinned hopes on the United
States, where a worldwide downturn started, to lead a recovery of the global
economy.

The Wall Street has enjoyed a nearly two-month rally
dotted only by sporadic drops, which has pushed the major indexes up more than
30 percent since the stock market hit a 12-year low in March.

The trends of the three major stock indicators look
similar to their historical performances when the market bottomed out in other
economic crises.

According to statistics since 1932, the SP 500
has gained an average of 46 percent in the year after stocks hit a bottom. The
index is now drawing a similar trail.

The scenarios at the opposite sides of the Atlantic
are different. The European Central Bank (ECB) on Thursday cut its main interest
rate by 0.25 basis points to a record-low 1 percent.

This has been the fourth cut of the ECB rate this
year to combat the ongoing international financial crisis.

ECB President Jean-Claude Trichet said the current
level of rates was "appropriate," but he left the door open for further rate
cuts.

"We have not decided today that the new level of our
policy rates was the lowest level, that we could never cross whatever future
circumstances could be," Trichet told a news conference.

Following the rate cut, Trichet announced a
surprising decision to buy bonds denominated in euros. "We expect to engage in a
program which could be around 60 billion euros," Trichet said.

The ECB plan targets "covered bonds," or securities
issued by banks and backed by mortgages or other loans, a move to greatly
relieve pressures on the banks in Europe.

Trichet did not explain how the purchases would be financed, saying the details of the plan would be decided at the next ECB meeting on June 4.

Special Report: Global Financial Crisis