Stress tests find 10 US banks need more funds

The Obama Administration was today poised to order about 10 US banks to raise new capital following government stress tests.

Washington is expected to tell 10 of the 19 banks undergoing the tests that they need to bolster their balance sheets to protect themselves against potential losses in future.

The exact number has yet to be decided but it is likely to include Bank of America, Citigroup and Wells Fargo and run into tens of billions of dollars.

Federal Reserve chairman Ben Bernanke and Treasury Secretary Tim Geithner assured investors that none of the banks will be allowed to fail and will be given government support if required.

Bank stocks surged on Wall Street last night, with Wells Fargo up 24%, Bank of America 19% and Citi 8%, on hopes that problems uncovered by the tests are not as bad as analysts fear.

There were concerns that banks ordered to raise extra money could be labelled weak and may even be nationalised, but the number in need of the funds has removed some of that stigma.

However, officials are still worried that the market will view the banks in question as insolvent when the results are published on Thursday.

Jamie Dimon, chairman and chief executive of JP Morgan Chase, which is not thought to be on the list, said: "The banking system can handle an awful lot of stress and be OK."