U.S. Stress-Test Accounting May Raise Capital Levels

By Craig Torres and Dawn Kopecki



Financial regulators may force many of the largest U.S. banks to raise new capital or conserve extra cash after accounting for assets held off their balance sheets. The Federal Reserve yesterday released the methods used in stress tests on the 19 largest U.S. banks, which incorporated an accounting proposal that would bring about $900 billion onto lenders’ books. The accounting change suggests most of the 19 will need to take some action to buttress their capital, analysts said. Stronger banks may keep dividend payments low or apply retained earnings, with others selling new shares to make up the amounts, they said. Karen Petrou, managing partner of Washington-based research firm Federal Financial Analytics, said banks may need as much as $70 billion in new capital just to cover the added burden of the accounting changes.