WASHINGTON — The Treasury Department released the terms and conditions of its revamped Capital Assistance Program, which has invested some $200 billion into 400 banks.
Future investments will take the form of preferred securities that can be converted into common equity. Treasury will pay 10% below a bank stock's Feb. 9 closing price. Banks applying for these funds will have to explain how they intend to use the capital "to preserve and strengthen their lending capacity — specifically, to increase lending above levels relative to what would have been possible without government support."
Treasury said it would make these plans public.
For more information see www.financialstability.gov
Separately, the banking agencies said they would work together to carry out the new so-called "stress tests" of banks with more than $100 billion of assets. By the end of April each of these large banks will be assessed under two scenarios: a baseline reflecting consensus expectations among private forecasters and a more adverse scenario reflecting a deeper and longer recession. "Supervisors will work with institutions to estimate the range of possible future losses and the resources to absorb such losses over a two-year period," the agencies said.