Regions Bank may not pass economic 'stress test'

By Jeanie Powell - bio | email
Posted by Dana Franks - email

HUNTSVILLE, AL (WAFF) - Experts predict an Alabama banking system could have trouble in its financial future.

On Friday, federal regulators met privately with the nation's largest banks to share the findings of a "stress test." Results won't be made public until May 4. It's a process dating back months, to see if some of the nation's largest financial institutions stay afloat if America's financial future months from now mirrors the current economic conditions.

According to Reuters, analysts predict out of 19 banks put under the government's microscope, Regions Financial Corporation may be the only one to fail the stress test, putting it at risk of raising more equity.

The test is supposed to evaluate the banks' capital standing. A financial consultant WAFF 48 News spoke with said the worst-case scenario would be a government bailout.

"The government's kind of treading a fine line here too, between watching out for these banks and seeing how they're doing and doing this stress test, but at the same time they don't want to erode any of the confidence we might be building in the economy right now," said John Burnett, who's an associate professor of finance at UA Huntsville.

WAFF 48 News contacted Regions' corporate office to ask what this test could mean for customers. A spokesperson said regions doesn't comment on rumor or speculation and gave us this statement:

"While regulators prohibit all banks from discussing exam results, we remain strong and stable and confident in our ability to emerge from this economic downturn in a position of strength. Just this week, we reported a profit for the first quarter and in the first three months of the year we opened a record number of new checking accounts."

"Probably one of the interesting parts about this stress test is how the government's going to rule this information out," Burnett said.

There are at least 25 Regions Bank branches in Madison County alone. The stress test helps determine which banks are strong and which would fail if times get worse and they need more money to survive.

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