Treasury To Delay Stress Test Results Until After Bank Earnings

Tyler Durden's picture

The U.S. Treasury will postpone the Stress test results until after Q1 bank earnings, according to Reuters, which is citing a source familiar. While the conspiracy theorists among us would not be surprised, this is a strange delay to say the least.

The source, speaking anonymously because the Treasury has not made a final decision on what to disclose, said officials do not want any test results released before the earnings season wraps up for most U.S. banks on April 24.

Bank regulators are at the stage of reconciling their own versions of the results with the banks' internal assessments.

Officials realize it may be hard to keep the results under wraps, and they are looking for ways the banks could disclose some details without unduly disturbing the markets. They are also looking at providing some summary information about how the banks fared.

"There will be definitely be some information that will be provided at the end of it, but exactly what that will be, and when it will be provided, will come forth later," Comptroller of the Currency John Dugan, who supervises some of the nation's largest banks, said last week.

The tests are designed to determine the depth of banks' capital holes if conditions deteriorate further. After the tests are completed, the banks will have six months to either raise private capital to compensate, or accept government funds.

But officials are worried about how the market will react to the stress test results if there is not a clear recovery path for a bank that is deemed to have a large capital need.

While the inverse case can be easily explained, having a bank announce exuberant earnings just to flop a few days later on a stress test failure does not seem like the most prudent approach. And as the Treasury claims, these results will be impossible to be "kept under wraps." Zero Hedge will be happy to chat with people who may have advance knowledge of which banks are deemed as lepers by Tim Geithner's henchmen (if any, of course, seeing how all of a sudden nobody needs any more help).

big hat tip Sean

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JAL's picture
JAL (not verified) Apr 12, 2009 5:50 PM

I understand all the negativity in bank fundamentals, that why I was holding SKF before that short squeeze on Friday. My fault I still hold it, however I wonder about the short term. It seems spincity will prevail on this one, in the short term anyways. I can see SKF diving into the 30-40 in the next month, simply based on the fact that banks need to raise cash, and high share prices are needed for that. Something the players should have no problems making happen for just long enough.

Any though on that, anyone?