FDIC sees most problem banks since 2003
Written on August 27, 2008
The number of troubled U.S. banks rose 30 percent to 117 in the second quarter, the highest level in five years, and a top regulator warned that conditions will worsen as the housing slump and credit crisis continues to pound profitability.
Federal Deposit Insurance Corp (FDIC) Chairman Sheila Bair said on Tuesday she expects more banks to join the agency’s watchlist of problem banks, which tallies institutions with financial, operational or managerial weaknesses that threaten their financial viability.
“We don’t think the credit cycle has bottomed out yet,” Bair told a quarterly news conference, adding that U.S. banks will not return to high levels of earnings anytime soon.
“We expect that banks and thrifts will keep building up reserves for the next several quarters,” Bair said.
The news initially pulled down financial shares before markets closed higher on the back of a surge in energy shares.
Nine U.S faxless payday loans. banks have failed so far this year, including mortgage IndyMac Bancorp Inc IDMC.PK, which has drained the FDIC’s Deposit Insurance Fund used to repay insured deposits at failed banks.
In a bid to replenish the $45.2 billion fund, Bair said the FDIC will consider a plan in October to raise the premium rates banks pay into the fund, a move that will further squeeze the industry.
The agency also plans to charge banks that engage in risky lending practices significantly higher premiums than other U.S. banks, Bair said, to encourage safer business practices.
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