US Capital Assistance Program defined

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WASHINGTON DC - The US Department of the Treasury has announced the terms and conditions for the Capital Assistance Program (Cap), which forms the core element of its Financial Stability Plan. The aim of the Cap is to restore confidence throughout the financial system that the nation's largest banking institutions have a sufficient capital cushion against larger than expected future losses.

Under the Cap, federal banking supervisors will conduct forward-looking assessments to evaluate the capital needs of the major US banking institutions within a more challenging economic environment. Should that assessment indicate an additional capital buffer is warranted, banks will have an opportunity to turn first to private sources of capital, then to government capital, which is being made available immediately through the Cap to eligible banking institutions.

All eligible US banking institutions with assets of more than $100 billion on a consolidated basis are required to participate in the co-ordinated supervisory assessments, and may access the Cap immediately. But US banking institutions with consolidated assets below $100 billion may also obtain capital from the Cap.

To clarify the broader context and objectives for the Cap, the Treasury has released a white paper on the programme, which can be found here: www.FinancialStability.gov.

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• Regulation
• Foreign exchange