What is required from the banks to repay bailout funds? Fed announces the rules

On Monday the Federal Reserve announced the rules banks should follow in order to repay taxpayer bailout funds which will allow 19 largest banks in the U.S. to reduce their dependence on the government. As it is known the stress test results released last month showed 10 banks need to raise a total of $75 billion in new capital to be able to survive possible future losses.

Thus, the rules will be applied to 19 largest banks with assets exceeding $100 billion who were subjected to "stress tests" to determine their financial strength. Thus, banks who want to repay bailout money should prove they can raise long-term debt without guarantees provided by the FDIC.

Additionally they should also persuade regulators they can continue lending to the borrowers with good credit history and maintain the minimum capital levels required under the stress tests. Besides, they should be able to meet funding obligations to business partners while "reducing reliance on government capital" and the FDIC guarantee.

Banks who wanted to repay bailout money submitted their applications for permission which in turn were sent to Treasury for approval. According to some sources first round of approvals are expected the week of June 8.