The Federal Reserve Board issued criteria Monday for evaluating which banks that have received Troubled Asset Relief Program funds will be allowed to repay them.
The central bank said that it will announce next week which of the 19 banks that underwent the stress tests will be allowed to repay Tarp.
JPMorgan Chase & Co., Goldman Sachs Group LLC, Bank of New York Mellon Corp., State Street Corp., Capital One Financial Corp. and American Express Co. are among the banking companies that came out of the stress tests not requiring additional capital. Most of these institutions have expressed interest in exiting Tarp soon; JPMorgan Chase & Co. is planning to raise roughly $5 billion in fresh capital as part of its effort to repay $25 billion that it received in government funds last year, the company said.
Under the Fed's criteria, banks wishing to repay Tarp must demonstrate an ability to issue debt not guaranteed by the Federal Deposit Insurance Corp.'s Temporary Liquidity Guarantee Program and show they have access to the public equity markets.
The Fed will also consider whether, after repaying Tarp, the bank can continue to lend, maintain sufficient capital, serve as a source of financial strength to its subsidiary banks and meet obligations to counterparties while reducing reliance on government capital and the liquidity guarantee program.
JPMorgan has long said that it could afford to pay back the funds without tapping public markets.
The capital-raising move is being triggered by a growing sense that federal officials want financial institutions to raise fresh capital as a condition of the repayment, people familiar with the situation said.
A capital raise by JPMorgan Chase would make it the latest in a slew of banks that have turned to investors in recent weeks to build larger financial cushions. It was one of nine banks that were not required to raise capital after the government stress tests this spring.