The regulator of national banks today praised last year's controversial stress tests for bolstering the health of the nation's biggest banks during a dark time last spring.
Comptroller of the Currency John Dugan also noted that banks so far are posting lower losses than projected under the most severe two-year economic projections used by regulators.
In a speech at a Federal Reserve Bank of Richmond symposium in Charlotte, Dugan acknowledged uncertainty about the tests rattled markets early last year, leading to a plunge in stock values. But the transparency of the results and the ability of banks to raise needed capital stabilized the financial system after results were announced last May, Dugan said.
"Markets believed that the test was credibly severe, and the veil of extreme uncertainty was lifted," he said.
A year later, most large U.S. banks have "very healthy levels of capital" that are high by recent historical standards. He called the program pushed by Treasury Secretary Tim Geithner the "most significant and successful" effort by the new administration to deal with the financial crisis.
Last May, the government determined the nation's 19 biggest banks needed $75 billion in additional capital. Charlotte-based Bank of America was told to bolster its capital buffer by $34 billion, while Wells Fargo & Co. had to add $13.7 billion. Both were able to raise the necessary capital without aid from the government.
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