TEN FINANCIAL groups including JP Morgan Chase and Goldman Sachs were yesterday allowed to repay a combined $68 billion (€48 billion) to the US treasury in a move that marks a turning point in the economic crisis but formalises the divide between healthy and fragile banks.

The companies, which also include Morgan Stanley and American Express, can now shed the restrictions on pay and hiring that came with the troubled asset relief programme (Tarp) launched last year at the height of the turmoil in global markets.

However, the move raises questions over the competitiveness of other big banks such as Citigroup and Bank of America, which have not yet been allowed to repay the combined $90 billion in Tarp money they have received.

The first batch of Tarp repayers includes eight banks that last month were found not to need additional capital after government stress tests.

Others allowed to return the funds included Morgan Stanley, which was instructed to raise capital, and Northern Trust, a bank catering to wealthy individuals that was not among the 19 institutions subjected to stress tests.

The repayment by the 10 institutions, which stepped up their campaign to be free of Tarp after Congress introduced constraints on bankers’ pay, is a sign of stability in the financial system.

“This is not a sign that our troubles are over, far from it,” US president Barack Obama said. “The financial crisis this administration inherited is still creating painful challenges for businesses and families alike. But it is a positive sign.”

The amount due to be repaid far outstrips a previous “conservative” estimate from the treasury that $25 billion would be repaid this year. The authorities have said they could use the repaid funds to help other institutions such as smaller lenders. – (Copyright The Financial Times Limited 2009)