No risk of insolvency

Some investors said the result of the government's two-and-a-half month examination was less negative than many feared. Other held out the idea that many banks would be able to boost their capital without government's support.

The US government hopes the results would help restore confidence and encourage lending.

"This is just the beginning and we are going to keep working to try and make sure this financial system is in ... a strong enough position so it can provide the credit necessary for recovery," Treasury Secretary Timothy Geithner, noting that none of the 19 banks are at risk of insolvency.

His remarks were echoed by White House spokesman Robert Gibbs.

"I think what we're likely to see is some confidence in our financial system and some genuine clarity about the path moving forward," said Gibbs at the daily press briefing, noting the banks will emerge stronger to help the economy rebound.

Earlier this week, Bernanke Tuesday also ruled out the possibility of a massive new round of bailouts to save the US banking giants.

"I've looked at many of the banks and I believe that many of them will be able to meet their capital needs without further government capital," Bernanke told the Congress' Joint Economic Committee on Tuesday.

The government has said in the past that no large bank will be allowed to fail.

The banks that require more funds could raise new common equity from existing shareholders ore new investors, convert preferred shares held by private investors or the government into common equity or sell additional assets.

If banks still could not raise enough capital to meet the stress test requirements, they could apply support from the US$700 billion bailout funds.

The unveiling of the result marked the end of a process designed by the Obama administration to restore confidence in the banking industry.

However, some economists and investors were skeptical about the credibility of the tests.

"At best, the process may have been a waste of time; at worst, it's something that has caused more confusion," said Mike Holland, chairman of private investment firm Holland & Co.

Tough exit rules

US regulators also imposed strict rules on banks that want to exit the financial bailout program, requiring them to demonstrate to the government that they can survive without its support.

Banks generally must apply to the Treasury and secure permission from their bank supervisor in order to repay the federal bailout funds, so far only a handful of small banks have done so.

The 19 largest banks seeking to withdraw from the US$700 billion rescue program will have to prove that they can borrow money without the support of the Federal Deposit Insurance Corp, said the US regulators in a joint statement released on Wednesday.

The guarantee of debt issuance offered by the FDIC allows banks to borrow money relatively inexpensively. Banks have more than US$330 billion in debt outstanding under the program.

The new rules could deter some banks such as Citigroup and Bank of America from trying to repay bailout funds early, said analysts

Some banks including Goldman Sacks, JPMorgan Chase, have vowed to exit the bailout program as soon as possible in part to prove their financial health, but also to escape from tough rules governing executive pay.

(Xinhua News Agency May 8, 2009)