The Federal Reserve opened the door Monday to allowing some major US banks with healthy finances to repay the government for capital injections as soon as next week.
The Fed said some of the 19 bank holding companies subjected to the so-called stress tests earlier this year could be given the green light to buy back government shares starting the week of June 8.
A number of major banks including Goldman Sachs, Morgan Stanley, Bank of America and others have said they would seek early reimbursement of the capital aid injections that began last year to shore up a financial system reeling from a housing meltdown and economic slump.
The Fed said that any banking organization "must first obtain approval from its primary federal supervisor," which would make a recommendation to the Treasury Department.
The banks "must demonstrate an ability to access the long-term debt markets" without government guarantees "and must successfully demonstrate access to public equity markets," the Fed said in a statement.
Repayment will also depend on a bank's ability "to continue to fulfill its role as an intermediary that facilitates lending to creditworthy households and businesses," the statement added.
The firms must meet other requirements and "must have a robust longer-term capital assessment" and be able to maintain "a prudent level and composition of capital" to function as a lender, the Fed said.
JPMorgan Chase said in a statement it intends to raise five billion dollars in common equity "to satisfy a supervisory condition" for the large banks that received capital under the program formerly called the Troubled Asset Relief Program.
"While approval has not been granted, the company believes that upon completion of this capital raise it will have satisfied the criteria for fully redeeming the TARP preferred capital and expects to do so before the end of June," the company said.
"JPMorgan Chase believes that redeeming the TARP preferred capital is in the best interests of the country and the company, and that these funds can be used by the government for other critical purposes."
American Express said it had commenced a public offering of 500 million dollars of common stock for sale to the public, as part of its plan to raise capital and repay the US government for a 3.4 billion dollar investment.
The Treasury has injected some 200 billion dollars in capital into dozens of banks out of a total program commitment for 250 billion dollars within the Capital Purchase Program and Troubled Asset Relief Program (TARP).
Some banks had argued that the capital program was forced on them and imposed conditions such as limits on executive compensation, and raised fears about government meddling in bank operations.
Source: AFP American Edition
