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US Futures Fall on Stress Test Fears

US stocks looked set to give back some of their recent gains at the open Tuesday as the government’s stress test for banks threatened to reignite fears over the sector.

About Ten US Stress Test Banks Need Capital

U.S. regulators have deemed that about ten of the 19 U.S. banks being stress tested will need to raise more capital, according to a source familiar with official talks.

The largest U.S. banks have been negotiating with regulators about how much of an additional capital buffer the banks will need to sustain losses that might occur if economic conditions deteriorate further. The government is scheduled to release the official results on Thursday.

The exact roster of banks needing to build their capital positions is still unclear. Banks are expected to be briefed on the official results on Tuesday.

The Federal Reserve and Treasury Department also will tell them how policymakers plan to publicly unveil the market-sensitive results, the source said, speaking anonymously because the discussions are private.

Fed Chairman Ben Bernanke and Treasury Secretary Timothy Geithner are scheduled to present the findings of the regulatory stress tests on Thursday in a 150-page document, the source said.

The document will include both aggregate results that reveal forthcoming credit losses in the banking sectors, as well as individual bank results that reveal the capital needs of the largest banks' holding companies, should the recession prove longer and deeper than what the government expects.

But some industry insiders worry that the stress test results will come at a time when the sector is starting to see positive effects from some surprisingly strong first-quarter earnings figures.

"I think the great risk there is that you create some new uncertainty and concerns at the very time the financial condition of the banking industry is turning for the better," Wayne Abernathy, an executive at the American Bankers Association and a former Treasury official said earlier on Monday.

The institutions undergoing stress tests include Citigroup, Bank of America, Goldman Sachs Group, JPMorgan Chase, Morgan Stanley, MetLife, Wells Fargo, PNC Financial Services Group, US Bancorp, Bank of NY Mellon, SunTrust Banks, State Street, Capital One Financial, BB&T , Regions Financial, American Express, Fifth Third Bancorp, KeyCorp and GMAC.