New Federal Programs Support the Banking System - Step One is the Capital Assistance Program and Economic Assessments

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As expected, today the U.S. Department of the Treasury (Treasury) released details of the new Capital Assistance Program, or CAP. Additionally, in a joint statement, the Federal Reserve Board, Federal Deposit Insurance Corporation (FDIC), Office of the Comptroller of the Currency and Office of Thrift Supervision announced plans to conduct “forward-looking economic assessments” of the country’s banking institutions with assets exceeding $100 billion – 19 institutions. Participation in the economic assessments (formerly known as “stress tests”) is not mandatory for participation in CAP. Nor do institutions participating in the economic assessments need to wait for that process to be completed prior to applying for a CAP investment.

In addition, the FDIC Board is scheduled to consider amendments to the temporary guarantee liquidity program’s debt guarantee program on Friday, February 27th. As announced, these amendments would provide an extension of the FDIC’s guarantee program to include mandatorily convertible debt securities.

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