Federal Reserve Outlines TARP Repayment Rules
The Federal Reserve Board outlined the criteria it will use to evaluate applications to redeem U.S. Treasury capital from the 19 U.S. bank holding companies that participated in the Supervisory Capital Assessment Program (referred to as "SCAP", or commonly called the "stress tests"), according to today's press release. The Supervisory Capital Assessment Program examined all U.S. bank holding companies with year-end 2008 assets exceeding $100 billion. The federal government had previously given U.S. bank holding companies in need of capital buffer augmentation until June 8, 2009 to develop a capital plan and until November 9, 2009 to implement that capital plan. Today's press release notes that redemption approvals for an initial set of U.S. bank holding companies are expected to be announced during the week of June 8, 2009.
The required test outlined by the Federal Reserve today is: "Any [U.S. bank holding company] seeking to redeem U.S. Treasury capital must demonstrate an ability to access the long-term debt markets without reliance on the Federal Deposit Insurance Corporation's Temporary Liquidity Guarantee Program (TLGP), and must successfully demonstrate access to public equity markets."
Click here for today's press release which includes additional considerations used by the Federal Reserve to determine the outcome of redemption applications.
