U.S. banking regulators announced Wednesday that the "stress test" program on banks with more than $100 billion in assets will be completed by no later than April, CNBC has learned.
The stress tests will evaluate banks under baseline and a more adverse scenario based on a 2-year period.
The Treasury announced that banks have option to convert preferred shares to common, as needed subject to regulatory approval and through stress tests.
The conversion price will be 90 percent of closing price for 20-day period ending Feb. 9.
Convertible preferred stock can be redeemed with common a stock issuance and the banks will pay additional fees for redeeming convertible preferred after 2-years.
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According to the stress test , you cannot pay a dividend greater than one penny on a common stock. The new convertible preferred stock comes with warrants.
Additional capital made available to banks will be determined by stress tests.