Tim Geithner, US Treasury secretary, said yesterday “the financial system is starting to heal” as he pledged to recycle returned bank bail-out funds into small community banks.
Citing improving lending conditions, easing concerns about systemic risk and lower leverage at banks, Mr Geithner said “a substantial part of the adjustment process” for the financial sector was now over.
As some larger banks become confident enough to repay funds from the government's troubled asset relief programme, the Treasury will recycle that money into smaller banks with under $500m (€366m, £329m) in assets, Mr Geithner said. They will have six more months to apply for funds and the Treasury will also increase the amount of money they can access from 3 per cent of risk-weighted assets to 5 per cent.