Update: Banks repaying TARP funds

June 1, 2009 | By Jim Kim

What must a bank do in order to pay back TARP funds? They must prove they can raise money without relying on government guarantees, show they can lend to creditworthy borrowers, maintain minimum capital levels as laid out by the stress tests and meet funding obligations to business partners. This is according to rules laid out formally by the Fed and reported by the New York Times.

Five banks have applied to repay TARP funds: JPMorgan Chase, Goldman Sachs, Morgan Stanley, American Express and Bank of New York Mellon. Other banks--such as BB&T, U.S. Bancorp, Capital One Financial--will likely join that group at some point. Some have been busy issuing shares to raise capital and debt to prove they can do it apart from the FDIC program. One wildcard here is Bank of America. It has made clear that it intends to repay TARP funds fairly soon, but it's unclear whether it will be in the first group to free themselves of these restrictions. Wells Fargo is in the same category.

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