Regulatory Agencies: Serious Banking Problems Lie Ahead

THE JOURNAL RECORD, May 22, 1987 | Go to article overview

Regulatory Agencies: Serious Banking Problems Lie Ahead


WASHINGTON (AP) - The health of the U.S. banking industry is less than robust and serious problems lie ahead, the five principal bank regulatory agencies told Congress Thursday.

In a status report to the Senate Banking Committee, the regulators said the industry has been battered as never before - by the economy, new competition and foreign borrowers.

Some said there are hopeful signs of recovery and that much of the industry is healthy. But William Seidman, chairman of the Federal Deposit Insurance Corp., while noting that 90 percent of the industry is healthy, said that is illusory.

``The condition of the banking system has been better and in a number of areas the trends are adverse,'' he said. ``... Overall, the statistics show a reasonably sound industry, but the averages mask a number of problems.''

``Simply put, a large segment of the banking industry today is suffering from, and will continue to suffer from, relatively weak earnings and poor asset quality,'' added Comptroller of the Currency Robert Clarke.

The status report came from the five institutions responsible for monitoring the nation's bank system: the Federal Reserve Board, the FDIC, the Office of the Comptroller of the Currency, the Federal Home Loan Bank Board and the National Credit Union Administration.

They described an industry that has gotten into deeper and deeper trouble in recent years.

Profits have declined for six straight years, and bank and savings and loan association failures are at record highs.

Seidman said he expects at least 200 bank failures this year, compared to 138 last year. FDIC is carrying 1,531 banks on its ``problem'' list, 85 percent of them west of the Mississippi River, reflecting problem loans in oil and farm states. …

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