Bank of America may need $34B in new capital

Bank of America has been among the hardest hit banks by the credit crisis and ongoing recession. It has received more than $45 billion in government aid already, and has come under heavy scrutiny in recent months for its acquisition of Merrill Lynch.

The New York Times and The Wall Street Journal are reporting that regulators are telling the Charlotte, N.C.-based bank it needs about $34 billion in capital based on results of government "stress tests."

The need for more capital comes as the government gets set to release the results of a stress test on Thursday that it completed on 19 banks to determine how they would fare in economic conditions worsened. The test aims to gauge how much of an additional capital cushion the nation's biggest banks need to protect against potential future losses.

The $45 billion Bank of America received from the government through the Troubled Asset Relief Program could be converted to common stock to help alleviate the cash shortfall. Currently the government holds preferred shares in Bank of America for its investment.

The bank's chief administrative officer, J. Steele Alphin, said in the New York Times report that the bank would have plenty of options to raise capital before it would need to convert taxpayer money into common stock.

Bank of America could also shed assets, such as a portion of its stake in China Construction Bank. A lockup provision expires Thursday that would allow Bank of America to sell about a third of its stake in the Chinese bank, which could fetch about $8 billion, according to the Journal report.

Last week, amid shareholder unrest about the Merrill deal, investors voted to split the roles of chairman and chief executive, stripping Ken Lewis of the chairman's position. He still remains CEO.