The government's stress test results are now old news; Morgan Stanley
Sandler O'Neill, a boutique investment firm focused on the financial services industry, applied the government's stress test methodology to the entire banking industry. They found that 38% of the 200 firms that sit just below the "big 19" are undercapitalized with an aggregate capital shortfall of $16.2 billion. The shortfall for all banks adds up to $24 billion.
Overbanked and undercapitalized
On the bright side, that amount is less than Bank of America
That's no bad thing: The U.S. banking system may be too concentrated at the very top, but with around 8,000 banks, it's clearly too fragmented below the "too big to fail" threshold.
Investors: focus on quality
Last September, I wrote: "I think we could see a large wave of bank failures, possibly numbering in the hundreds. Not megabanks like Citigroup
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Alex Dumortier, CFA has a beneficial interest in Wells Fargo, but not in any other of the companies mentioned in this article. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a disclosure policy.