U.S. regulators have told Bank of America Corp and Citigroup Inc that following recent stress testing of the two banks they may need to raise more capital, the Wall Street Journal reported.
The shortfall in capital amounts to billions of dollars at BofA, the paper said on Tuesday, citing people familiar with the bank.
BofA was not immediately available to comment on the report, while a Citigroup spokesman in Hong Kong declined to comment. A Federal Reserve spokeswoman declined to comment on the report.
Both banks, whose officials are objecting to the preliminary findings of the tests, plan to respond with detailed rebuttals, the people told the paper, adding BofA's appeal was expected by Tuesday.
It is likely that Citigroup and BofA are not the only banks the Federal Reserve has determined might need more capital, the paper said.
The Fed had said last week that the tests conducted at major banks were aimed at ensuring the institutions have enough capital in reserve to continue to lend in potentially bleaker conditions, and are not a measure of banks' current solvency.
STRESS TEST DETAILS AWAITED
The United States broadly outlined how it stress tested the health of the country's top 19 banks on Friday, but disappointed investors who were looking for more details of how stringent the tests were.
The Fed has said most of the 19 banks have capital levels well in excess of the amounts required to be deemed well capitalized. However, it said heavy losses had lowered capital and choked off lending.
The results of the tests will be released during the week of May 4, and regulators hope that by outlining the methodology used, investors will have a way to gauge the results.
Some banks with too thin a capital cushion will have six months to find private funds, others may need to accept an immediately infusion of taxpayer money.
The 19 banks tested, which include JPMorgan Chase & Co and Wells Fargo & Co , hold two thirds of the assets and more than half of the loans in the U.S. banking system.
ASIAN MARKETS FALL
Shares in Hong Kong extended losses to fall more than 2.5 percent on Tuesday on renewed worries about the financial sector following the report, while in the Nikkei average fell 2.7 percent to its lowest close in almost a month, as the yen surged on the report.
The dollar fell as low as 95.60 yen, the lowest in a month.
(Additional reporting by Mark Felsenthal in Washington, Editing by Ian Geoghegan and Dan Lalor)