Nineteen of the nation largest banks will get a grade this week after the government asses balance sheets and funds meant to survive a prolonged economic downturn. Bill Roop, a local banking expert, explains what these results could mean for our overall banking system.
Alpine Bank President Bill Roop says the results of the stress tests could be stressful for some of the nineteen banks being sized up. The test is used to determine the financial health of the institutions. Regulators want to know if these banks can survive further economic descent and still hold up if home prices fall another 20 percent this year, and at least seven in 2010. Roop says media leaks report that at least six of the banking giants need to boost their capital, signaling there could be more gloom ahead.
“A number of these nineteen banks are going to have some serious problems in their capital because there is going to be greater impact to the reserve loan losses which is going to have dramatic affect on their capital. So whether or not we have seen the light or pull the wool, I think banks in general may have some additional earnings issues they need to deal with in coming quarters.”
President Obama says it is likely that banks will need additional money beyond the 700 billion dollars pledged in the rescue package. The results are expected to be released on Thursday.