Details of Bank Stress Tests to Be Released at 2 pm

U.S. bank regulators will release a "concept paper" on Friday to explain so-called stress tests at the nation's largest banks that could result in the determination that a bank needs to find some way to bolster capital.

The document will be released at 2 pm New York time on Friday, a source familiar with the process said.

The paper will outline the underlying concepts or variables used in the tests of how the 19 largest banks would fare if the economy—already in the throes of one of the longest and deepest recessions in decades—took an even sharper turn for the worse.

The concept paper is a precursor to the main event: release of the results of the stress tests May 4. A closely watched outcome of that exercise will be to determine which of the banks, which include Citigroup , JPMorgan Chase and Wells Fargo , may need to raise more capital to weather the storm.

"The market will focus on any indication of capital targets," Paul Miller of FBR Capital Markets wrote in a note to clients.

The Obama administration's goal is for the stress tests to restore confidence in the U.S. banking sector, which has been battered by losses from the collapse of the housing market, a spike in credit defaults and the painful recession.

The tests will also require some institutions to come clean about weaknesses and commit to a course of action to regain health. Those salvage plans could include seeking further government assistance and, at the extreme, replacing senior managers.

Treasury Secretary Timothy Geithner announced the tests Feb. 10 as part of plans to purge toxic assets from the U.S. financial system and restore credit flows.

• What the Pros Say About Bank Stress Tests

Examiners will see how banks cope with stresses stemming from an economy that shrinks by as much as 3.3 percent this year and in which unemployment goes as high as 10.3 percent next year. While some analysts have criticized those parameters as not stringent enough, a regulatory official said on Thursday the tests would be tough.

The institutions undergoing stress tests also include: Bank of America , Goldman Sachs , Morgan Stanley , MetLife , PNC Financial Services , US Bancorp , Bank of NY Mellon , SunTrust Banks , State Street , Capital One Financial , BB&T , Regions Financial , American Express , Fifth Third Bancorp , Keycorp , and GMAC .

• Slideshow: The 15 Biggest Holders of US Government Debt
• Slideshow: What Does $1 Trillion Look Like?

Copyright 2009 Reuters. Click for restrictions.