Bank of America Corp (BAC)

[WID]

Fed Said to Ask Banks to Submit Plans to Repay TARP

Nov. 23 (Bloomberg) -- The Federal Reserve asked nine of the U.S. banks that were part of this year’s stress tests to submit plans for repaying the government’s capital injections, a person familiar with the situation said.

The central bank this month asked Bank of America Corp. and eight other banks to give plans including a timetable, said the person, speaking on condition of anonymity. The firms may have the option to repay the Troubled Asset Relief Program funds soon if they’ve been able to raise common equity recently and would continue to exceed capital buffers set in the stress tests, the person said.

The Fed’s request may put more pressure on banks to repay TARP funds. Banks have had leeway to work with their supervisors and decide when to approach the government with a repayment plan. Together the nine banks have received about $142 billion in TARP funds, out of the $700 billion Congress authorized in 2008 for the financial rescue.

“It would send a terrific message to the market if there was a plan and a timetable for at least the top banks in TARP to pay the money back,” said Joel Conn, president of Lakeshore Capital Inc. in Birmingham, Alabama, which owns stock in PNC Financial Services Group Inc. “It would signify they are good enough to stand on their own.”

The banks in the stress test that have yet to repay TARP are Bank of America, PNC, Citigroup Inc., Fifth Third Bancorp, GMAC Inc., KeyCorp, Regions Financial Corp., SunTrust Banks Inc. and Wells Fargo & Co.

Stress Tests

The request was reported earlier today by DealReporter.com, a news service that focuses on mergers and is part of Pearson Plc’s Financial Times Group.

The Fed released results in May from stress tests that showed how the 19 largest U.S. lenders would fare in a slower recovery with higher-than-forecast unemployment. Ten companies including Bank of America, Wells Fargo and Citigroup needed to raise additional capital.

Regions doesn’t comment on talks with regulators, spokesman Tim Deighton said. Bank of America and SunTrust declined to comment. Citigroup’s Stephen Cohen declined to comment.

Julia Tunis Bernard, a spokeswoman for Wells Fargo, Bill Murschel, a KeyCorp spokesman, and Debra Decourcy of Fifth Third didn’t return calls for comment. Fred Solomon, a PNC spokesman, and GMAC’s Gina Proia declined to comment.

To contact the reporters on this story: Scott Lanman in Washington at [e-mail]; Craig Torres in Washington at [e-mail].