NEW YORK: A day after saying big US banks probably needed to raise only
one-fourth the capital demanded by the government, Standard & Poor's
said the nation's banking crisis has "merely entered a new phase" and might not
end before 2013.
The credit rating agency said the industry is being propped up by hundreds of
billions of dollars of government support, especially for lenders considered
too important to the financial system to fail.
While efforts to spur lending, take bad assets off banks' balance sheets, and
restart the market for packaging and selling securities may help the sector,
S&P said banks will have a tough time surviving absent a bigger capital cushion
than regulators require.
"There's nothing to say that this banking crisis can't go on for another three
or four years," S&P Managing Director Tanya Azarchs said.
S&P did not immediately return a request for comment.
On Tuesday, S&P said major US banks need to raise about $18 billion of capital
to protect themselves from the economic downturn, though this amount could grow
if conditions worsen.
The amount is well below the $74.6 billion that the government last week
ordered 10 of the largest US banks, led by Bank of America Corp and Wells Fargo
& Co, to plug potential capital shortfalls.
These 10 banks were among 19 subjected to government "stress tests" to gauge
their readiness to withstand a particularly severe recession in 2009 and 2010.
The other nine, including JPMorgan Chase & Co and Goldman Sachs Group Inc, got
clean bills of health when stress test results were released on May 7.
S&P on May 4 said it may lower its ratings for 23 US banks and thrifts,
including 10 that underwent stress tests, citing concern about the industry's
capitalization. It said the 23 companies had at least a 50 percent chance of
being downgraded within 90 days.
http://economictimes.indiatimes.com/US-banking-crisis-may-last-until-2013-SP/articleshow/4527186.cms
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