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.
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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.
