When it comes to the results of the stress-test, the Obama administration believes that darkness is the best disinfectant. It doesn’t want capital markets to freak out about the stress tests, and so it plans to keep the results quiet. We have a feeling the only time we’ll hear that a bank needs to raise new capital is when it actually does.
But that might not be legal. As Marketwatch points out, failing to disclose the results of the stress tests might run afoul of disclosure rules.
Banks… are under pressure to disclose the results of their stress tests to shareholders. Banks are expected to sign capital-assistance documents upon the completion of the stress tests, explaining whether they are seeking out immediate government capital infusions or they plan to spend six months raising capital before re-evaluating.
The signing of those documents could be a material agreement, which means banks must file an 8-K with the Securities and Exchange Commission, explaining what they’ve agreed to.
“It’s a material event,” said Gary Roth, partner at Alston & Bird LLP in New York. “When banks are given their results, they would be under a lot of pressure to disclose. When one discloses, it puts pressure on the other banks to disclose.”
SEC officials are in discussions with bank regulators about disclosure responsibilities.
“From the Treasury or Fed’s perspective, you don’t want the disclosures to be too diverse,” said Dwight Smith, partner at Alston & Bird LLP in Washington.
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