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U.S. "Problem" Banks Surge by 27%

Written By Brian Hicks

Posted February 23, 2010




Like a gigantic ooze from some horror movie the number of “problem” banks continues to grow…

From Bloomberg by Phil Mattingly entitled: U.S. ‘Problem’ Banks Soar, Lending Drops, FDIC Says.

“U.S. “problem” lenders climbed to the most in 17 years in the fourth quarter, and the Federal Deposit Insurance Corp. fund protecting customers against failures posted a wider deficit, the agency said.

The FDIC included 702 banks with $402.8 billion in assets on the confidential list as of Dec. 31, a 27 percent increase from 552 banks with $345.9 billion in assets at the end of the third quarter, the regulator said today in a quarterly report. “Problem” banks account for 8.7 percent of all U.S. lenders.

“The growth in the number and assets of institutions on the problem list points to a likely rise in the number of failures,” FDIC Chairman Sheila Bair said today at a Washington news conference. “Both the problem list and bank failures tend to lag behind economic recovery.”

Regulators are closing banks at the fastest pace since 1992, seizing 20 lenders through seven weeks this year after shutting 140 institutions in 2009 amid loan losses stemming from the collapse of the home and commercial mortgage market. A total of 28 banks failed in 2007 and 2008 combined.

“The pace is going to pick up this year and is going to exceed where we were last year,” Bair told reporters.

The insurance fund deficit widened to $20.9 billion from $8.2 billion in the previous quarter, when the account had its first negative balance since 1992. The FDIC last year required banks to prepay three years of premiums, raising $46 billion on Dec. 30, the agency said today. The fourth-quarter balance doesn’t reflect the payments, as premiums are to be phased in each quarter during the next three years, the agency said.” 

To date, the FDIC has closed 20 U.S. banks this year and 185 since January 2008.

To read the FDIC’s entire annual report on the banking industry click here.

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