A large number of smaller banks will need to raise additional capital if they want to fortify themselves against a sharp downturn in the U.S. economy.
Out of 418 U.S. banks with assets of $1 billion to $100 billion, 367 will need to raise a total of $75 billion, according to a report released Wednesday by researcher SNL Financial. The group used the same adverse conditions under which the government conducted its recent stress test on the top 19 banks. Those tests found that 10 of the 19 would also need a total of $75 billion more capital over the next six months.
Many of the relatively smaller banks don’t own the kind of toxic securities that have hurt the large Wall Street banks. However, they are more exposed to losses from traditional lending. With unemployment rising, consumers continuing to keep their purse strings tied and businesses folding, defaults are expected to soar on loans for homes and office buildings.
“Shopping malls are weak, office-vacancy rates are surging and industrial loans will start going bad as more companies file for Chapter 11,” says Martin Weiss of Weiss Research.
Click here to read the full article…
