Federal regulators are moving to impose tough conditions on banks that want to repay bail-out funds, requiring them to prove they can issue debt without a government funding guarantee.

This new requirement, which was confirmed by a senior US official, could deter some banks from trying to repay funds early. Banks have issued more than $300bn of debt insured by the Federal Deposit Insurance Corporation.

The condition will be part of a framework for repayment that could be published as early as today ahead of the release of bank stress test results tomorrow. It was disclosed as it emerged that Citigroup would have to raise less than $10bn in fresh equity following the completion of the stress tests.

Financial Times