to project capital buffers that the banks would need under the two scenarios. as you know, unlike other countries that conducted stress exercises, we took the highly unusual step of publicly reporting the findings of the scap, including the capital needs and loss estimates for each of the 19 banks. 2 this departure from the standard practice of keeping examination information confidential was based on the belief that greater transparency of the process and findings would help restore confidence in u. s. banks at a time of great uncertainty. supervisors released the methodology and assumptions underlying the stress test first and then, two weeks later, the results for individual institutions. the results showed that under the more adverse scenario, 10 of the 19 scap banks would need to raise a total of $ 75 billion in capital in order to have the capital buffers that were targeted under the scap – tier 1 capital in excess of 6 percent of risk - weighted assets and tier 1 common capital in excess of 4 percent of risk - weighted assets at the end of the two - year horizon. the merits of publicly releasing firm - specific scap results were much debated within the federal reserve. in particular, some feared that weaker banks might be significantly harmed by the disclosures. in the end, though, market participants vindicated our decision. they appeared to be reassured for three reasons. first, the results were deemed credible by most market participants, owing in part to the release of details about our assumptions and methods, as well as the variation in assessment of the banks. second, the results were released at a time when uncertainty about bank conditions was very high, and some market participants feared the worst. that is, perceptions of tail risk were very high, and the scap results helped reassure market participants that under a severe but plausible scenario, the capital needs of the largest u. s. banks were manageable. third, the treasury stood ready to board of governors of the federal reserve system ( 2009 ), “ federal reserve, occ, and fdic release results of the supervisory capital assessment program, ” press release, may 7. make capital available to any scap bank with capital needs through the cap if they were unable to raise private capital. in retrospect, it is clear that the public release of the scap results played an important role in stabilizing the financial system, as has our supervisory follow - up on improving capital levels. by november 2009, the 10 banks that required additional capital had increased their tier 1 common equity by more than

$ 77 billion, primarily by issuing new common equity, converting existing preferred equity to common equity, and selling businesses or portfolios of assets. none of the scap banks received cap funds. 3 many observers initially criticized the stress tests as overly optimistic. on the one hand, they noted that gdp growth was weaker and unemployment higher in 2009 than projected in the more adverse scenario. on the other hand, house prices did not fall as much as assumed under the more adverse scenario. as of the end of 2009, actual losses at the 19 banks were less than one - half of the two - year loss estimates under the more adverse scap scenario, and actual revenues were more than one - half of the two - year revenue estimates. nevertheless, there is wide variation across the firms, and it is too soon to tell whether firms will perform better over the full two years than the scap estimates. the lessons of the scap as i suggested at the outset of my remarks, i doubt that anything as ambitious as the scap would have been tried – at least as soon as it was – but for the exigencies of the financial crisis. yet the approach we took in the scap was informed by discussions that had been taking place among supervisors and academics for some time. not surprisingly, against the backdrop of the crisis, the scap experience elaborated and confirmed principles that had been advocated internally by some supervisors, but that had not been broadly incorporated into the practice of regulatory agencies. first, whether conducted by banks or supervisors, stress tests must consider severe but plausible scenarios, including low probability events with potentially highly adverse effects. in the period leading up to the crisis – characterized by strong profits, excess liquidity, and low credit losses – too many banks and regulators were skeptical of the possibility of a rapid and severe deterioration such as ultimately occurred in the u. s. housing, mortgage, and shortterm funding markets. if the crisis taught us anything, it is that we must test to the tail, not to the mode. a related point is that a stress test will be most useful if applied to the full range of credit and trading exposures. second, good management - information systems are critical to the ability of firms to manage their risks. assessing risk exposures across an entire organization is essential to understanding the potential effect of correlated risk exposures that may reside in distinct business lines as well as different legal entities and regulatory jurisdictions. yet during the scap, many of the banks were unable to