U.S. banks submit capital replenishment plans: Fed

By Mark Felsenthal

WASHINGTON (Reuters) - All 10 of the largest U.S. banks under orders to raise additional capital as a buffer against further economic shocks have submitted their plans to do so, the Federal Reserve said on Monday.

"As supervisors, we will be working with the institutions to ensure their plans are implemented quickly and effectively," the Fed said in a short statement.

The Obama administration ordered the 19 largest U.S. banks to show how they would fare in a hypothetical economic turn for the worse. As a result of the exercise, the government demanded in early May that 10 banks boost their capital buffers by a total of $74.6 billion.

The "stress test" process is a centerpiece of administration efforts to restore confidence in the banking system, which has been severely shaken by the worst financial crisis since the Great Depression.

All of the banks would meet their capital requirements even after projected losses under the government's worst-case scenario if they successfully follow their plans, the Fed said. They have until November 9 to follow through.

The Fed provided no details about the plans.

Bank supervisors will work with all regulated firms to review capital planning, risk management, and corporate governance, the Fed said.

Banks have raced to raise capital by selling stock and assets and by issuing debt. Even banks that did not need to plug a capital shortfall have raised equity or issued non-government guaranteed debt in order to repay emergency government capital infusions.

Top officials have been heartened at the brisk pace at which banks have been able to raise capital, viewing it as a sign of rising market confidence in banks. However, regulators want to be sure that banks do not repay government capital until they are strong enough to lend to consumers and businesses.

Banks have been eager to shed government capital because of conditions attached to it, including limits on executive pay.

Bank of America Corp (BAC.N), the largest U.S. bank, had the biggest capital shortfall, $33.9 billion. In recent weeks it has offered equity worth $21.37 billion, sold debt worth $5.5 billion and assets worth about $7.3 billion.

The bank, which accepted $45 billion from the Treasury Department's emergency program, forced out its chief risk officer last week.

The Treasury could announce as soon as Tuesday which banks will be allowed to repay emergency government cash infusions.

(Reporting by Mark Felsenthal; Editing by Diane Craft)