Small banks that received funds through the
Capital Purchase Program (CPP) may struggle to repay the US
Treasury, according to a report from the Congressional Oversight
Panel.
The report, Small
Banks in the Capital Purchase Program, found that
“one-size-fits-all” repayment terms mean that large banks have been
much better served by the programme than smaller institutions.
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As a result, the Treasury may be stuck for
some time with stakes in banks that cannot raise replacement
capital.
Banks that can’t repay their CPP capital by
2013 will see their dividend payment grow to 9% from the current
5%.
The Treasury provided capital to banks
participating in the programme under a single set of repayment
terms designed at the outset of the scheme.
Of the 19 US banks with more than $100 billion
in assets, 17 participated, receiving 81 percent of the programme’s
$205 billion fund.
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By GlobalDataTo date, 76% of the large banks have already
repaid taxpayers, and many are now reporting record profits.
By contrast, of the 7,891 banks with assets of
less than $100 billion, only 690 received funds from CPP and less
than 10 percent have repaid.
One in seven small banks in the CPP has
already missed a dividend payment; the Treasury has $24.9bn of CPP
funds outstanding from small banks.
According to the report, “the prospects for
full recovery are uncertain.”
