More banks in trouble

August 26th, 2008, 3:01 pm · Post a Comment · posted by Mathew Padilla

A federal regulator said today the list of nationwide troubled banking institutions grew 30 percent to 117 in the three months ending in late June. That is largest number on the Federal Deposit Insurance Corporation’s watch list since the middle of 2003.

The FDIC doesn’t disclose the names of banks and thrifts on the list.

Sheila Bair, FDIC chairman, said more banks will be added to the list as credit problems worsen. Her comments accompanied the release of second quarter stats on insured banks and thrifts.

She said that in early October the FDIC will consider a plan to replenish the agency’s Deposit Insurance Fund (DIF), which saw a large drop due to the failure of IndyMac Bancorp in Pasadena in July and other bank failures. The fund’s balance fell 14 percent to $45.2 billion at the end of the second quarter, from $52.8 billion at the end of the first quarter.

The fund will likely be shored up by an increase in the premium rates that banks pay into it.

“And we’ll be proposing changes to the current assessment system that will shift a greater share of any assessment increase onto institutions that engage in high-risk behavior to encourage and reward safer behavior,” Bair said.

Risk takers, you have been warned.

Other points from the FDIC’s Q2 report:

All commercial banks and savings institutions insured by the FDIC reported a profit of $5 billion in the second quarter, down 86.5 percent from the $36.8 billion that the industry earned a year earlier.
With the exception of the fourth quarter of last year, the latest earnings were the lowest for the industry since the fourth quarter of 1991.
Total assets of troubled institutions increased from $26 billion at the end of March to $78 billion at the end of June. That includes $32 billion coming from IndyMac, which was seized in July, after the second quarter ended.

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