by Calculated Risk on 5/07/2009 05:00:00 PM

From the Fed:

The results of a comprehensive, forward-looking assessment of the financial conditions of the nation's 19 largest bank holding companies (BHCs) by the federal bank supervisory agencies were released on Thursday.

The exercise--conducted by the Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation--was conducted so that supervisors could determine the capital buffers sufficient for the 19 BHCs to withstand losses and sustain lending--even if the economic downturn is more severe than is currently anticipated. In a detailed summary of the results of the Supervisory Capital Assessment Program (SCAP), the supervisors identified the potential losses, resources available to absorb losses, and resulting capital buffer needed for the 19 participating BHCs.

The SCAP is a complement to the Treasury's Capital Assistance Program (CAP), which makes capital available to financial institutions as a bridge to private capital in the future. Together, these programs play a critical role in ensuring that the U.S. banking sector will be in a position of strength.

Overview of Results (333 KB PDF)

The results of the SCAP suggest that if the economy were to track the more adverse scenario, losses at the 19 firms during 2009 and 2010 could be $600 billion. The bulk of the estimated losses –approximately $455 billion – come from losses on the BHCs’ accrual loan portfolios, particularly from residential mortgages and other consumer‐related loans. The estimated two‐year cumulative losses on total loans under the more adverse scenario is 9.1 percent at the 19 participating BHCs; for comparison, this two‐year rate is higher than during the historical peak loss years of the 1930s. Estimated possible losses from trading‐related exposures and securities held in investment portfolios totaled $135 billion.

Ten banks need $185 billion in additional capital:

After taking account of losses, revenues and reserve build requirements, in the aggregate, these firms need to add $185 billion to capital buffers to reach the target SCAP capital buffer at the end of 2010 under the more adverse scenario. But a number of these firms have either completed or contracted for asset sales or restructured existing capital instruments since the end of 2008 in ways that increased their Tier 1 Common capital. These actions substantially reduced the final SCAP buffer. In addition, the preprovision net revenues of many of the firms exceeded what was assumed in the more adverse scenario by almost $20B, allowing them to build their capital bases. The effects of these transactions and revenues rendered the additional capital needed to establish the SCAP buffer equal to $75 billion.

Note: It's important to note these are future losses in addition to write-downs already taken.