Obama plans meeting on bank stress tests

President Barack Obama plans to meet on Friday with top financial regulators to sketch out the next steps to take with the stress tests being conducted at the 19 biggest U.S. banks, a source familiar with the meeting said on Thursday.

Treasury Secretary Timothy Geithner, Federal Reserve Chairman Ben Bernanke and Federal Deposit Insurance Corp Chairman Sheila Bair will meet with Obama to brief him on the progress of the tests and discuss the next steps, the source said.

In an attempt to assess banks' capital needs, the government is testing how they would fare under more adverse economic conditions than are expected.

A White House spokeswoman confirmed that a Friday meeting was scheduled and said it would focus broadly on economic recovery and financial stability. But she would not confirm who would attend the session. A Treasury spokesman confirmed that Geithner would be in attendance but declined to provide any further details.

U.S. officials will not look to close any banks based on the results of stress tests, another source familiar with official talks said.

You can't close a bank based on a hypothetical, that source said, speaking anonymously because the tests are still being finalized. And you wouldn't want to anyhow, based on the size of the banks.

However, the tests are likely to show that some banks may have sizable capital needs under the conditions being tested, which is common sense, the source said.

The tests may not be viewed as credible if they show that an institution such as Citibank would perform well under the adverse economic conditions being tested, the source said.

Citibank is the retail banking arm of financial services giant Citigroup, which has received more than $45 billion in taxpayer bailout funds, as well as loss guarantees.

An FDIC spokesman said the stress tests will help determine whether the biggest U.S. financial institutions need to raise capital or sell assets.

The FDIC views the stress assessments as a necessary step in the process of proactively assuring the strength and stability of our banking system over the next few years, FDIC spokesman Andrew Gray said.

These assessments should guide institutions in whether they should raise capital or sell assets to promote a more vibrant, strong banking system, Gray said.

Officials are still discussing how to release the results of the stress tests, and the decision will likely be made by the Treasury, the source familiar with official talks said.

The source said officials are aiming to release them in some form at the end of April after the first-quarter bank earnings season is over, and are trying to be sensitive to financial market reaction.

(Reporting by Karey Wutkowski, Rachelle Younglai, John Poirier, and Jeff Mason; Editing by Lisa Von Ahn and John Wallace)