Magazine article American Banker

More Than Half of Banks on Problem List Are Well Capitalized, the FDIC Reports

Magazine article American Banker

More Than Half of Banks on Problem List Are Well Capitalized, the FDIC Reports

Article excerpt

WASHINGTON -- More than half the banks on the regulator's problem list are well capitalized.

In a report released last week, the Federal Deposit Insurance Corp. said that only 226 banks failed to meet its "well-capitalized" definition at yearend.

That meand 246 banks with more than 101%risk-based capital, including 6% equity, are on the problem list.

The numbers raise the possibility that the government is overstating the industry's weaknesses, an industry consultant says.

The FDIC also disclosed that it whittled down the problem list during 1993 by 45%, to 472 banks.

The size of the problem list is tied to the premiums banks must pay for deposit insurance.

"The problem list is overstated," said Bert Ely, president of Ely & Co., a financial institutions consulting firm in Alexandria, Va. "This has been a gripe of mine for two or three years now."

Bank Insurance Fund

Today the FDIC board is expected to meet and discuss the Bank Insurance Fund's recapitalization and the future of insurance premiums.

The larger the problem list, the more money the FDIC sets aside in reserves for future losses.

The bigger the FDIC's reserves, the more premium revenue is needed to meet the insurance fund's congressionally mandated goal of $1.25 for every $100 of insured deposits.

The longer it takes to meet that goal, the longer it takes for bank insurance rates to come down.

Mr. Elly predicted premiums will fall to 3 basis points in 1996 after the FDIC hits the 1. …

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