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The Federal Reserve will give the 19 largest banks a preliminary result of its capital stress test, offering institutions that fail a chance to adjust their dividend and stock buyback policies, Bloomberg News reported on Friday. The change comes after Citigroup Inc. and SunTrust Banks Inc. narrowly missed meeting the 5 percent tier one common equity to risk-weighted assets minimum capital ratio in the 2012 test at 4.9 percent and 4.8 percent respectively. Ally Financial Inc. had a stressed ratio of 2.5 percent in the last test. While the change gives bank boards a second chance, the Fed will also publish the result of their initial capital proposal, showing how far the firms missed in their first attempt. A severe shortfall on the first attempt will generate greater scrutiny of a bank's capital planning process by regulators.

Hurricane Sandy caused massive disruptions to U.S. businesses and threatened billions of dollars in damage to a region packed with corporate headquarters, retail stores and transportation hubs, the Wall Street Journal reported today. Estimates for the financial consequences of the storm in the U.S. run to the billions of dollars. Disaster-modeling company Eqecat said the storm could cost the insurers between $5 billion and $10 billion. The Global Business Travel Association last year estimated that a large hurricane costs airlines, Amtrak, rental car companies and hotels nearly $700 million in lost or deferred business-travel spending. The broader impacts on the U.S. economy should be "noticeable but temporary," said economists at Moody's Analytics.

American International Group Inc. agreed to pay $11 million to resolve a multistate probe into its handling of death benefits, the second pact for state regulators this month as they push insurers to clear their books of overdue life-insurance payments, the Wall Street Journal reported today. AIG joined Nationwide Financial Services Inc., MetLife Inc., Prudential Financial Inc. and Manulife Financial Corp.'s John Hancock unit in settling with regulators amid accusations that the insurance industry has failed to do enough to find beneficiaries of policies they wrote years earlier. The companies all have agreed to routinely check their lists of policyholders against a Social Security Administration death database and have vowed to track down survivors of customers who have died.

A unit of insurer MBIA Inc. challenged Stockton, Calif.'s, bankruptcy on Wednesday, saying that the case was invalid because the city did not first negotiate with its biggest unsecured creditor, the California Public Employees' Retirement System, Reuters reported yesterday. The National Public Finance Guarantee Corp., which insured nearly $94 million of the city's revenue bonds, said that the city was required to negotiate in good faith with creditors before filing, according to the objection filed in bankruptcy court.

Wisconsin's insurance commissioner yesterday said that he asked a state judge for permission to pay out about $800 million to policyholders of a unit of bankrupt bond insurer Ambac Financial Group Inc., Reuters reported yesterday. Theodore Nickel, the insurance commissioner, oversees a "segregated account" that contains many risky mortgage obligations of Ambac Assurance Corp. He said that upon receiving court permission, he will "in the near term" begin paying 25 percent of each of the $3.2 billion of policy claims submitted so far, and 25 percent of each policy claim submitted in the future. Nickel is also seeking court approval for Ambac Assurance to pay about $278 million in cash for $939 million principal amount of surplus notes it had issued in June 2010.