The Federal Reserve opened the door Monday to allowing some 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."
Source: AFP American Edition