An Idaho-based bank has quietly withdrawn its application for bailout funding in response to concerns about its capitalization levels.
Cascade Bancorp, which applied earlier this year for assistance under the Troubled Asset Relief Program, said in a filing with the Securities and Exchange Commission that regulators had instructed the bank to improve capital levels, reduce nonperforming assets, and improve overall liquidity.
The bank has been struggling since the banking crisis began, and executives were initially eager for federal assistance. According to the filing with the SEC, in recent months it had begun to "substantially increase" the interest-bearing accounts it holds with the Federal Reserve Bank in anticipation of undergoing "a wide variety of stress tests."
Such stress tests have become a critical element of the Treasury Department's evaluation process of bailout applications. In order to receive assistance, financial institutions must prove that, if they receive funding, they will be able to survive a further banking crisis.
Cascade's announcement that it had withdrawn its application is a clear sign that it would not have qualified for assistance in its current condition. To avoid creating stigmas on already struggling banks, the Treasury's policy has been to signal to banks that it would not be approved and then permit the withdrawal without comment.
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