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2 banks weak in stress test

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The Associated Press

The Tampa Tribune

Published: April 29, 2009

WASHINGTON - Citigroup Inc. and Bank of America Corp. will need to raise more capital based on preliminary results of their government-run "stress tests" - unless they succeed in appealing the findings, according to two people familiar with the matter.

The banks are making their arguments to regulators, said these people, who spoke on condition of anonymity because they have been ordered not to discuss it. Among their points could be that regulators don't fully understand the banks' operations, they said.

The companies face an uphill battle in convincing Fed officials, who privately released the results Friday, that the results are wrong, analysts said. They noted that the tests are supposed to be rigorous enough for the results to be widely accepted.
Federal Reserve officials told reporters Friday that all 19 banks that underwent stress tests will need to keep an extra buffer of capital reserves beyond what's now required, in case losses continue to mount. That would mean some banks will likely have to raise additional cash.

The Fed stressed in a statement that a bank's need for more capital reserves to meet the requirements should not be considered a measure of the "current solvency or viability of the firm."

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