Academic journal article Journal of Accountancy

Financial Institutions Strengthen, but Problems Persist

Academic journal article Journal of Accountancy

Financial Institutions Strengthen, but Problems Persist

Article excerpt

According to a review of Federal Reserve Board and Office of Thrift Supervision call report data for the fourth quarter of 1992 conducted by Veribanc, Inc., most of the nation's financial institutions continued to recover. However, some problems still exist at a number of chronically weak banks and thrift institutions.

Commercial banks. For the nation's 11,983 commercial banks, 1992 was a banner year. Total problem loans declined to $80.6 billion from $95.3 billion at the end of 1991, while loan loss reserves dropped narrowly to $56.5 billion from $57.5 billion. As a result, loss reserve coverage for the banking system improved.

While the number of undercapitalized banks rose slightly to 127 from 125 at the end of 1991, the number of significantly undercapitalized banks dropped to 53 from 84 at yearend 1991. More important, the number of critically undercapitalized banks declined to only 12 from 99 in the previous year. As one result of the improved capitalization, the Federal Deposit Insurance Corporation predicted some 30 to 60 banks would fail in 1993, compared with 121 bank failures in 1992 and 127 in 1991. …

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