Magazine article American Banker

FDIC Drops Troubled Bank's Insurance after Failure to Correct Loan Problems

Magazine article American Banker

FDIC Drops Troubled Bank's Insurance after Failure to Correct Loan Problems

Article excerpt

WASHINGTON -- For the first time since 1976, the Federal Deposit Insurance Corp. has canceled the deposit insurance of a federally insured bank after the institution failed to meet operational demands made by the FDIC.

The decision last week to end coverage for Security Bank of Dickson, Dickson, Tenn., was a result of the bank's inability to comply with an administrative action by the FDIC against it.

FDIC officials have suggested that the insuring agency's increasing use of administrative actions against banks may result in additional cancellations of federal deposit insurance against banks failing to comply with agency demands. Last year, 32 administrative actions were filed against FDIC-insured banks.

In March 1984, the FDIC legally required Security Bank to correct poor lending and operating practices, according to the agency. When the bank did not comply, the FDIC on Sept. 11 canceled insurance coverage. A day later, it accepted a voluntary surrender of the bank's charter from the Security board of directors and proceeded to have the bank closed.

"We initiate administrative actions with increasing frequency," an FDIC spokesman said last week. Of the 32 filed last year, four are in progress, while 28 were against banks that fixed their problems, were merged, or failed, the spokesman added.

Insurance cancellation is rare. In 1976, the FDIC canceled the insurance coverage of the First State Bank and Trust in Rio Grande, Tex. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.