May 6 (Bloomberg) -- Banks that need to raise capital under the government’s stress tests will have until June 8 to develop a plan and until Nov. 9 to implement it, U.S. bank regulators said today.

The capital buffer for each bank holding company “is sized to achieve a Tier 1 risk‐based ratio of at least 6 percent and a Tier 1 common risk‐based ratio of at least 4 percent at the end of 2010, under a more adverse macroeconomic scenario than is currently anticipated,” the regulators said in a joint release.

The government will release results of the so-called stress tests Thursday at 5 p.m. Washington time. The final report concludes weeks of probing into banks’ securities and loan portfolios by examiners to investigate whether they could withstand a worsening recession.

“The presence of this one‐time buffer will give market participants, as well as the firms themselves, confidence in the capacity of the major bank holding companies to perform their critical role in lending, even if the economy proves weaker than expected,” the agencies said.

Bank of America Corp., Citigroup Inc., Wells Fargo & Co. and GMAC LLC are said to be among the companies judged to need additional capital according to results of regulators’ stress tests on the 19 largest U.S. banks.

More Capital

Bank of America has the biggest shortfall, at $34 billion, according to people familiar with the matter. Citigroup’s requirement for deeper reserves to offset potential losses over the coming two years is about $5 billion, people with knowledge of that bank’s results said. Wells Fargo requires about $15 billion, while GMAC’s need is $11.5 billion, one person said.

Capital-raising plans could include sales of business lines, issuance of “new private capital instruments,” spinoffs, and continuing restrictions on dividends and stock repurchases, the release said. Financial institutions must also provide an outline of how they plan to repay government stakes, and “reduce reliance on guaranteed debt issued under” a Federal Deposit Insurance Corp. program.

The Treasury will consider exchanging its existing preferred stock in banks into mandatory convertible preferred shares “as a bridge to private capital.” The exchange requires that banks raise new private capital in tandem and that they convince private investors who hold preferred shares to convert into common stock.

Repaying the Government

Financial institutions that want to repay government’s stakes, purchased previously under $700 billion rescue program passed by Congress last year, must have capital consistent with the government-mandated buffer, the agencies said. They also must be able to demonstrate “financial strength by issuing senior unsecured debt for a term greater than five years not backed by FDIC guarantees,” the regulators said.

The 19 banks in the test hold two-thirds of the assets and more than one-half of the loans in the U.S. banking system, regulators say.

Examiners used an “adverse scenario” of a 3.3 percent decline in gross domestic product this year, and an average unemployment rate of 8.9 percent this year and 10.3 percent in 2010. Forecasters see a 2.5 percent decline in output this year, and unemployment rates of 8.9 percent this year and 9.4 percent next year, according to the median estimates in a Bloomberg News survey.

“As part of the 30-day planning process, firms will need to review their existing management and board in order to assure that the leadership of the firm has sufficient expertise and ability to manage the risks presented by the current economic environment,” the government agencies said.

The release was issued by Secretary Treasury Timothy Geithner, Federal Reserve Chairman Ben S. Bernanke, FDIC Chairman Sheila Bair, and Comptroller of the Currency John Dugan.

To contact the reporter on this story: Craig Torres in Washington at ctorres3@bloomberg.net

Last Updated: May 6, 2009 18:46 EDT