Apparently 6 banks are going to require additional capital following the results of U.S. government stress tests. This includes Citi and BoA.

Apparently there are three ways being offered for the banks to shore up there capital. Two of them, additional government aid and the sale of more stock look unlikely. The third method is the conversion of preferred stock owned by the U.S. government through the TARP scheme into common stock. That would get rid of any pretence that Citi is now anything but nationalized.

Benefits coming from conversion of TARP stock would mostly exist only on paper, although by easing pressures on capital adequacy they could help the banks to survive the next few months to a year as they continue to take write downs on loan portfolios.