Ten US banks fail stress test
It has been revealed that 10 of the top banks in America have filled the regulatory stress test and will be forced to raise more capital in the short term. The figure is very disappointing when you consider that only 19 US banks were stress tested in total and over half of them failed. It is estimated that up to $74 billion in additional funding will be required in the next month otherwise there could be serious repercussions for the US banking sector.
Already we see plans afoot for significant fundraisings by the 10 banks in question and while the reaction of the US stock market has been fairly positive there are concerns about the short to medium term outlook. A reduction in the power of the US banking sector will weigh heavily upon the expected recovery in the US economy and the suggestion that investors will need to stump up the $74 billion required could prove troublesome in the current environment.
While there are no direct implications for the UK banking sector, concerns have been raised regarding the funding requirement of UK banks and their current position. While many believed the banking sector in both the UK and the US was "over the worse" it would appear that times are still very difficult.
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