Magazine article American Banker

Sick Banks' Assets Up 26% in Last Four Months

Magazine article American Banker

Sick Banks' Assets Up 26% in Last Four Months

Article excerpt

SAN ANTONIO -- In the latest sign that big-bank troubles are mounting, assets of institutions on the Federal Deposit Insurance Corp.'s problem list have jumped 26% since Sept. 30.

While the problem banks' assets were rising to $613 billion on Jan. 31, the number of FDIC-insured banks and thrifts on the list fell by 10, to 1,071.

The numbers are diverging because "commercial real estate is not in the small banks, and real estate is the problem," FDIC Chairman William Taylor told a group of reporters at the Independent Bankers Association of America convention.

Insurance Consequences

The 26% increase in problem bank and thrift assets exceeded the 20% gain in third-quarter 1991. The figure had held virtually flat from December 1990 to June 1991.

Problem institutions' assets stood at $486.9 billion on Sept. 30, when the average bank or thrift in the group had $450 milion in assets. That figure was 27% higher on Jan. 31, at $572 million.

Problem banks' percentage of total industry assets grew to 18% at the end of January from 14% in last year's third quarter, FDIC data showed.

Mr. Taylor said he does not know how high insurance premiums will have to rise to cover likely failures. "It will probably be higher" than the present 23 cents per $100, he said, "but how much higher I really don't know."

Taylor Reassuring

If the increasing concentration of problem assets at larger banks is reassuring to the community bankers meeting in San Antonio, Mr. Taylor's formal address on regulatory practices was doubly reassuring.

Mr. Taylor expressed sympathy with the bankers' complaints about "regulatory overkill" and said he has no intention of regulating compensation of senior executives, an especially sore point among Independent Bankers Association members.

The new FDIC chief was warmly applauded on those counts. …

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