WASHINGTON, May 4 (Xinhua) -- U.S. regulators have urged Wells Fargo to raise more capital after government "stress tests" showed the bank would have trouble surviving a deeper recession, the Associated Press reported on Monday.
The report cited two people familiar with the matter as saying that Wells Fargo is one of several banks that regulators said would need larger buffers to protect them against possible future losses.
The fourth-largest U.S. bank is one of the 19 largest U.S. banks undergoing the government "stress tests," the result of which is expected to be released on Thursday. The initial stress test results were revealed to the banks last month.
WASHINGTON, May 6 (Xinhua) -- U.S. regulators said on Wednesday that the nation's largest banks that were found to have the need to raise more capital in the "stress tests" will have one month to develop the plan.
After the details of the "stress tests" are released on Thursday afternoon, any banks needing to augment its capital buffer will have until June 8 to develop a detailed capital plan, and until Nov. 9 to implement that capital plan, said the regulators.
"Over the next 30 days, any bank holding company (BHC) needing to augment its capital buffer will develop a detailed capital plan to be approved by its primary supervisor, in consultation with the FDIC, and will have six months to implement that plan," said a joint statement released by Treasury Secretary Timothy Geithner, Federal Reserve Chairman Ben Bernanke and FDIC Chairman Sheila Bair.
U.S. media have reported that about half of the 19 largest U.S. banks will be told to raise more capital after being "stress tested" by the government.
Citigroup, Bank of America, Wells Fargo and JPMorgan Chase are reported to be among those who will have to boost their reserves.
But Bernanke on Tuesday ruled out the possibility of a new round of massive bailouts to save the U.S. banking giants.
"I've looked at many of the banks and I believe that many of them will be able to meet their capital needs without further government capital," Bernanke told the Congress' Joint Economic Committee.
In Wednesday's joint statement, U.S. regulators also vowed to support the banks if necessary.
"A strong, resilient financial system is necessary to facilitate a broad and sustainable economic recovery," said the statement.
"The U.S. government reaffirms its commitment to stand firmly behind the banking system during this period of financial strain to ensure it can perform its key function of providing credit to households and businesses," it added.
WASHINGTON, May 6 (Xinhua) -- U.S. regulators said on Wednesday that the nation's largest banks that were found to have the need to raise more capital in the "stress tests" will have one month to develop the plan.
After the details of the "stress tests" are released on Thursday afternoon, any banks needing to augment its capital buffer will have until June 8 to develop a detailed capital plan, and until Nov. 9 to implement that capital plan, said the regulators.
"Over the next 30 days, any bank holding company (BHC) needing to augment its capital buffer will develop a detailed capital plan to be approved by its primary supervisor, in consultation with the FDIC, and will have six months to implement that plan," said a joint statement released by Treasury Secretary Timothy Geithner, Federal Reserve Chairman Ben Bernanke and FDIC Chairman Sheila Bair.
U.S. media have reported that about half of the 19 largest U.S. banks will be told to raise more capital after being "stress tested" by the government.
Citigroup, Bank of America, Wells Fargo and JPMorgan Chase are reported to be among those who will have to boost their reserves.
But Bernanke on Tuesday ruled out the possibility of a new round of massive bailouts to save the U.S. banking giants.
"I've looked at many of the banks and I believe that many of them will be able to meet their capital needs without further government capital," Bernanke told the Congress' Joint Economic Committee.
In Wednesday's joint statement, U.S. regulators also vowed to support the banks if necessary.
"A strong, resilient financial system is necessary to facilitate a broad and sustainable economic recovery," said the statement.
"The U.S. government reaffirms its commitment to stand firmly behind the banking system during this period of financial strain to ensure it can perform its key function of providing credit to households and businesses," it added.
Photo taken on May 6, 2009 shows the headquarters of Citigroup Inc. in the borough of Manhattan in New York, the U.S.. U.S. regulators Thursday unveiled the long-waited results of the government's stress tests, which show that 10 of the nation's 19 largest banks need a total of 74.6 billion dollars. (Xinhua/Shen Hong) Photo Gallery
by Xinhua writer Liu Hong
WASHINGTON, May 7 (Xinhua) -- U.S. regulators Thursday unveiled the long-waited results of the government's stress tests and urged 10 of the nation's 19 largest banks to raise about 75 billion dollars in new capital to withstand future losses if the recession worsened.
Federal Reserve chairman Ben Bernanke said the results "should provide considerable comfort to investors and the public," noting nearly all the banks have sufficient capital "to absorb the higher losses envisioned under the hypothetical adverse scenario."
The assessment results are "just one important element of the governments broader and ongoing efforts to strengthen the financial system and the economy," said the U.S. central bank chief in a statement.
"Roughly half the firms, though, need to enhance their capital structure to put greater emphasis on common equity, which provides institutions the best protection during periods of stress," he said.
MORE CAPITAL NEEDED
Among the institutions needing more capital, Bank of America needs to raise 33.9 billion dollars in capital with Wells Forgo needing 13.7 billion dollars and the auto and mortgage lender GMACLLC requiring 11.5 billion dollars, said the Federal Reserve, which led the tests.
Meanwhile, Citigroup requirement for deeper reserves to withstand future losses is about 5.5 billion dollars and Morgan Stanley needs 1.8 billion dollars. Regions Financial Corp., Fifth Third Bancorp, KeyCorp, PNC Financial Service Group Inc. and SunTrust Banks also were told to bolster their reserves.
By contrast, Bank of New York Mellon Corp, American Express Co., Capital One Financial Corp, Goldman Sachs Group Inc, JPMorgan Chase Co., U.S. Bancorp, BBT Corp., State Street Corp. and MetLife Inc do not need capital.
The revelation that Bank of America needs about 33.9 billion dollars to fill the hole will increase pressure on Ken Lewis, the company's embattled chief executive.
The tests also found that total credit losses for the 19 banks may reach 600 billion dollars in 2009 and 2010. All told, if the economy performs as badly as the worst case scenario used in the stress test, the 19 banks' losses would mount to 950 dollars billion from mid-2007 through 2010.
U.S. regulators gave the banks that are found to raise more capital one month to come out with the plan.
"Over the next 30 days, any bank holding company (BHC) needing to augment its capital buffer will develop a detailed capital plan to be approved by its primary supervisor, in consultation with the FDIC, and will have six months to implement that plan," said a joint statement released by Treasury Ministry and other regulators.
Banks needing to augment its capital buffer will have until June 8th to develop a detailed capital plan, and until November 9th to implement that capital plan.
NO RISK OF INSOLVENCY
Some investors said the result of the government's two-and-a-half month examination was less negative than many feared. Other held out the idea that many banks would be able to boost their capital without government's support.
The U.S. government hopes the results would help restore confidence and encourage lending.
"This is just the beginning and we are going to keep working to try and make sure this financial system is in ... a strong enough position so it can provide the credit necessary for recovery," Treasury Secretary Timothy Geithner, noting that none of the 19 banks are at risk of insolvency.
His remarks were echoed by White House spokesman Robert Gibbs.
"I think what we're likely to see is some confidence in our financial system and some genuine clarity about the path moving forward," said Gibbs at the daily press briefing, noting the banks will emerge stronger to help the economy rebound.
Earlier this week, Bernanke Tuesday also ruled out the possibility of a massive new round of bailouts to save the U.S. banking giants.
"I've looked at many of the banks and I believe that many of them will be able to meet their capital needs without further government capital," Bernanke told the Congress' Joint Economic Committee on Tuesday.
The government has said in the past that no large bank will be allowed to fail.
The banks that require more funds could raise new common equity from existing shareholders ore new investors, convert preferred shares held by private investors or the government into common equity or sell additional assets.
If banks still could not raise enough capital to meet the stress test requirements, they could apply support from the 700 billion bailout funds.
The unveiling of the result marked the end of a process designed by the Obama administration to restore confidence in the banking industry.
However, some economists and investors were skeptical about the credibility of the tests.
"At best, the process may have been a waste of time; at worst, it's something that has caused more confusion," said Mike Holland, chairman of private investment firm Holland Co.
Photo taken on May 6, 2009 shows the Metlife building in the borough of Manhattan, New York, the U.S.. U.S. regulators Thursday unveiled the long-waited results of the government's stress tests and found that 10 of the nation's 19 largest banks need to raise 74.6 billion dollars in new capital to withstand possible future losses. (Xinhua/Shen Hong) Photo Gallery
TOUGH EXIT RULES
U.S. regulators also imposed strict rules on banks that want to exit the financial bailout program, requiring them to demonstrate to the government that they can survive without its support.
Banks generally must apply to the Treasury and secure permission from their bank supervisor in order to repay the federal bailout funds, so far only a handful of small banks have done so.
The 19 largest banks seeking to withdraw from the 700 billion dollars rescue program will have to prove that they can borrow money without the support of the Federal Deposit Insurance Corp, said the U.S. regulators in a joint statement released on Wednesday.
The guarantee of debt issuance offered by the FDIC allows banks to borrow money relatively inexpensively. Banks have more than 330billion dollars in debt outstanding under the program.
The new rules could deter some banks such as Citigroup and Bank of America from trying to repay bailout funds early, said analysts
Some banks including Goldman Sacks, JPMorgan Chase, have vowed to exit the bailout program as soon as possible in part to prove their financial health, but also to escape from tough rules governing executive pay.
U.S. regulators set June 8 deadline for banks to develop capital plan
WASHINGTON, May 6 (Xinhua) -- U.S. regulators said on Wednesday that the nation's largest banks that were found to have the need to raise more capital in the "stress tests" will have one month to develop the plan.
After the details of the "stress tests" are released on Thursday afternoon, any banks needing to augment its capital buffer will have until June 8 to develop a detailed capital plan, and until Nov. 9 to implement that capital plan, said the regulators. Full story
NEW YORK, May 7 (Xinhua) -- Some investors said the result of the U.S. government's stress tests on major financial institutions does not erase all concerns about the U.S. financial system.
"We still need to be worried about banks," Teddy Weisberg, a trader told Xinhua at the New York Stocks Exchange on Thursday.
"Clearly if we have learned anything well from the past 18 months, I think we learned that we need to be a little cautious and a little worried about a lot of things," he said.
U.S. regulators on Thursday unveiled the long-waited result of the stress tests and 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.
Among the institutions needing more money, the Bank of America needs to raise 33.9 billion dollars in capital; Wells Forgo, 13.7 billion dollars; and the auto and mortgage lender, GMAC LLC, 11.5 billion dollars.
"We certainly saw with the release of first quarter earnings from the banks that, on the operating basis, clearly with the favorable yield curve, they had no problems making money," Weisberg said.
"But the issue continues to be the toxic waste, or the bad assets, on their books. I don't think the stress tests address these bad assets that continue to be on the books of banks," he said.
Weisberg said although the results of the tests showed the banks need additional money in the worst case scenario, "unfortunately, it is a scenario, and one of the problems with creating the scenario is that now we have this bogy that everybody is going to look at."
"If the economy does not get better or gets worse, a lot worse than we expect, then we have created a whole new set of problems," he said.
The tests found that total credit losses for the 19 banks may reach 600 billion dollars in 2009 and 2010. If the economy performs as badly as the worst case scenario assumed in the tests, the losses of the banks could amount to 950 billion dollars from mid-2007 through 2010.
However, Nouriel Roubini, the NYU Stern School of Business professor, said the stress tests for the 9 major banks were not "stressful enough."
"Even with the recent economic news, the stress tests were not worst case scenarios. In fact, for some of the components, like unemployment, the reality is actually already worse than the more adverse scenario in the tests," Roubini, also known as "Dr Doom," told CNBC.
He said the unemployment rate in this year's fall may be already higher than the one assumed in the more adverse scenarios of the tests for 2010.
The International Monetary Fund (IMF) has doubled estimates of aggregate losses for loans and corresponding securities to 2.7 trillion dollars in its latest global financial review.
"These estimates put the financial system on the brink because the financial sector holds half of the losses. Since the 19 largest banks own the vast majority of assets, it therefore follows that they must also be holding the losses," Roubini said.
"Each bank clearly had the incentive to sugarcoat their expected losses to regulators. Nothing good could come from aggressively marking down their books. So while the losses are calibrated to be consistent across all 19 banks, the overall level of the losses will be downward biased.
"This explains why the stress tests don't completely jive with either the market estimates or the stock market drops," he said.
U.S. regulators gave the banks, found to be in need, to raise more capital and one month to come up with a plan. The banks will have until June 8 to develop a detailed capital plan, and until November 9 to implement it.
"The financial sector has been and will continue to be the most important part of the U.S. economy. It was certainly the area that had the most problems, which created most problems for the U.S. economy and the stock market," Weisberg said.
"So, far beyond the results of the stress tests, the financial sector, the big money banks in particular, will continue to be very much in focus for investors and traders for many, many months if not years to come," he said.
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.
NEW YORK, May 6 (Xinhua) -- Wall Street climbed in early trading Tuesday, as economic data indicated job losses slowed in April.
The ADP employer services reported that companies in the United States cut an estimated 491,000 workers from payrolls in April, smaller than economists' forecast and the fewest since October.
The report boosted investors' confidence and offset worries that banks may need more capital than previously thought.
The market was awaiting the results of the government's stress test of the nation's 19 largest banks, due Thursday. The report is expected to reveal which banks will need to raise capital.
Concerns about the stress test intensified after The New York Times reported Wednesday that federal regulators have warned Bank of America Corp. that it will need to raise about 34 billion U.S. dollars, more than expectations.
The Dow Jones rose 89.60 to 8,500.25. Broader indexes also moved higher. The Standard Poor's 500 index rose 10.07 to 913.87;and the Nasdaq climbed 14.91 to 1,769.03.
BEIJING, May 4 -- Citigroup Inc may need to raise as much as 10 billion U.S. dollars to meet the government's increased capital standards for banks outlined in its stress tests, according to a report.
The New York-based bank is negotiating with the Federal Reserve and may need less capital if it is able to convince regulators of its financial health, The Wall Street Journal said on its Website. The report cited people familiar with the matter.
A Citigroup spokeswoman said the bank had no comment on the story.
On Friday, the United States government pushed back its expected release date of the stress test results to Thursday from today as regulators negotiate with the banks over the findings.
Fed officials had said all 19 banks that underwent the stress tests will need to keep extra funds beyond what's now required in case losses on loans and other assets continue to climb. That was a signal some banks would have to raise more cash.
Initial results showed Citigroup and Bank of America Corp would be among that group, sources had said.
BEIJING, April15 -- New yuan lending surged in Shanghai in the first quarter as banks pumped in liquidity to boost the economy, the Chinese central bank said yesterday.
Banks in Shanghai issued total new yuan-backed lending of 228.1 billion yuan (33.4 billion U.S. dollars) in the first three months of this year, up 136.4 billion yuan from a year ago, the Shanghai headquarters of the People's Bank of China said yesterday in a statement.
The new yuan loans were mainly offered to the infrastructure, leasing, real estate and manufacturing industries, which accounted for 80 percent of the total new yuan lending, it said.
Individual lending also rose in the first quarter. New yuan individual consumption loans added 4.6 billion yuan in the first quarter, up 2.65 billion yuan from a year earlier.
The recovery of the real estate market also helped individual mortgage loans to climb last month.
Individual mortgages rose by 2.44 billion yuan last month, a year-on-year rise of 3.41 billion yuan, mainly boosted by second-hand home transactions.
Though lending grew rapidly in the first quarter, savings also rose in the period - an indication that the central government still has to launch more measures to stimulate domestic consumption.
As inflation started to ease this year and the investment market was relatively lukewarm, individuals were putting more money into bank accounts over concerns of a worsening economy.
Yuan savings rose 286.22 billion yuan in the first quarter, up 89.2 billion yuan from a year earlier. They accounted for 55.5 percent of total new yuan savings last year.
Total deposits - yuan-backed and foreign currency-denominated - climbed by 301.54 billion yuan, a record high, in the first quarter. They are equivalent to 57.4 percent of last year's new savings.
Individuals are retreating back to domestic banks amid concerns over the performance of overseas banks.
BEIJING, April 15 -- China's financial hub of Shanghai is expanding its banking zone to facilitate a growing number of overseas banks. The country's largest city also wants to enhance its financial role in Asia.
Shanghai is attracting more overseas banks, where their business can then be extended to the whole country. Thailand's biggest commercial lender, Bangkok Bank, is among those trying to be incorporated in Shanghai.
Sitthichai Jiwattanakul, GM of Bankok Bank Shanghai Branch said "Our best performing branches are all in China. If you give me a map, and ask me where you should invest. I will say Shanghai, China."
By the end of 2008, there were nine-hundred financial institutions in Shanghai and half were from overseas. Eighty-five percent of overseas banks choose to be headquartered in Shanghai. Faced with such demand, the city will expand the bank zone beyond the traditional Bund area. What's called a "financial ecology" will be established during the expansion.
Wang Wentao, Secretary of Shanghai Huangpu District Party Committee said "A financial ecology means a good correlation between finance and other industry and a good relationship between banks and residents. "
Shanghai's plan is to enlarge the bank zone along the city's Bund district until it reaches 2.6 square kilometers by 2020.
BEIJING,April 14-- China's banking industry snatched the world's number one spot in 2008 with net profits growing 30.6 percent year on year to reach 583.4 billion yuan, the People's Daily reported on Monday.
Chinese banks also lead the global banking industry in terms of return on investment, which stood at 17.1 percent last year, around 7 percentage points higher than the global average.
In their annual earnings releases for the year 2008, Chinese listed banks reported excellent results. The Industrial and Commercial Bank of China (ICBC) reported a profit of 111.2 billion yuan, a 35.2 percent increase year on year. China Construction Bank registered a 34 percent growth in annual profits to 92.64 billion yuan. Profits of the Bank of China and Bank of Communications grew 14.42 percent and 40.05 percent respectively to reach 64.36 billion yuan and 28.39 billion yuan.
The extraordinary performance of Chinese banks in the midst of the worst financial crisis for decades is due to their recent drive to turn themselves into modern financial enterprises, and enhanced risk control, the *** said.
At the end of 2008, capital adequacy ratios in 193 commercial banks, accounting for 99.5 percent of the country's total banking capital, were higher than national regulations require.
Chinese lenders have been closely following the development of the global financial market and adjusting their asset structure and investment strategies accordingly, the *** said.
Starting from 2008, ICBC reduced its holding of risky foreign currency bonds and set aside enough reserve funds to cover any losses from such investments.
The lender's latest earnings report showed that it had held 1.195 billion dollars of U.S. subprime mortgage-backed bonds at the end of 2008. It had had 599 million U.S. dollars of Alt-A mortgage-backed bonds and 55 million U.S. dollars of structured investment vehicles (SIVs). But the total value of all these securities ¨C 1.849 billion U.S. dollars ¨C accounted for just 0.13 percent of the bank's total assets.
In the face of the global financial crisis and the domestic economic slowdown, Chinese banks have responded to the central government's monetary easing by increasing credit. Increased lending has, on the one hand, supported the government's efforts to expand domestic demand and spur economic growth and, on the other hand, enhanced banks' profitability.
Since last November, bank lending has been growing rapidly. New loans in January reached a record high of 1.62 trillion yuan.
Meanwhile, Chinese banks have also adjusted their credit portfolios, beefing up support to small and medium-sized enterprises (SME) as well as to farmers in rural areas where access to loans used to be limited.
China Construction Bank (CCB) has so far set up 78 SME centers nationwide to streamline loan procedures for SMEs.
"With these centers, SMEs know where to go for a loan and the bank's client managers also actively seek out SME clients, which they largely ignored previously. We are aiming to cut procedures for a SME loan to 5.7 days from the current 10.9 days," said Zhu Dabin, director of one of CCB's SME centers.
Last year, Chinese banks' outstanding loans to small enterprises rose 15 percent. Chinese banks' steady performance amid the economic downturn at home and abroad is due to the country's steady financial reforms in recent years, the *** said.
Six years ago, the country's state-owned commercial banks were regarded by foreign media as "technical bankrupt" and a "time-bomb for the Chinese economy". But these same banks have grown into internationally recognized commercial lenders after carrying out shareholding reforms, introducing strategic investors and public listings. Driven by the reform of the big banks, China's other banks have also made great headway in restructuring and risk control. The whole banking industry has undergone fundamental changes.
The ratio of non-performing loans in major commercial banks stood at just 6 percent in September 2008 compared with 23.6 percent at the end of 2002.
The Chinese banking industry has never been in a better state, the *** said. The healthy development of the banking sector will not only tide it over the global financial crisis but also help lay a solid foundation for the steady, rapid growth of the country's economy.¡¡
BEIJING, April 13 -- China's big four state-controlled banks will be the first batch to run their own insurance company in a pilot program, an official from the country's banking regulator said at a forum on Saturday.
"We've reached agreement with the insurance regulator on banks to set up their own insurance companies, and the big four banks will be the first batch to run on a pilot basis," said Lai Xiufu, an official from the China Banking Regulatory Commission (CBRC).
At a press conference in February, Li Kemu, vice chairman of the China Insurance Regulatory Commission, told reporters that there should be at least one insurance company launched by a bank approved this year. The two regulators have now reached a consensus on the regulatory framework.
BEIJING, April7 -- Chinese customers feel more satisfied with services from medium-sized banks than with the country's top three State banks, according to a national survey of 4,684 customers conducted by marketing information firm Market Probe China.
China Merchants Bank, a mid-sized lender based in Shenzhen, took the crown as the bank customers are most satisfied with, according to the survey.
Industrial and Commercial Bank of China (ICBC), the world's largest bank by market value, failed to make the top ten in Market Probe's banking customer satisfaction list. The other two of China's top three banks, China Construction Bank (CCB) and Bank of China (BOC), tied for seventh place.
Although independent surveys of customer satisfaction have become industry standards in most developed countries, they are rarely seen in China.
Market Probe's survey is the first independent and unbiased survey of customer satisfaction in China's banking industry. Xu Jingkui, president of Market Probe China, said his company plans to conduct such surveys every year. It asked customers to rate seven different categories of retail banking services in Chinese banks: branch experience, credit card, personal loan, wealth management, private banking, telephone banking and Internet banking.
Medium-sized banks such as China Merchants Bank, Shanghai Pudong Development Bank and Industrial Bank topped Market Probe's customer satisfaction list in all categories.
Market Probe's survey is based on answers from Internet users through Chinese Internet portal Sohu.com's finance section from Dec 15, 2008 to March 28, 2009.
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