US `problem banks` soar to 416 in Q2; highest in 15 years

Last Updated: Thursday, August 27, 2009 - 23:27

Washington: The American banking system
continues to feel the tremors of the financial turmoil, with
the number of problem banks shooting up to 416 in the June
quarter, the highest since 1994.

The Federal Deposit Insurance Corporation (FDIC), the
regulator which insures bank deposits, today said the count of
problem banks — those at the risk of failing — has soared to
416 as on June 30, 2009.
"At the end of June, there were 416 insured institutions
on the `Problem List,` up from 305 on March 31. This is the
largest number of institutions on the list since June 30,
1994, when there were 434 institutions on the list," the
regulator said in a statement.

The total assets of problem entities climbed to USD 299.8
billion in the second quarter, the highest level since
December 31, 1993.

Moreover, the commercial banks and savings institutions
insured by the FDIC incurred losses of USD 3.7 billion in the
June quarter.

According to the latest figures, insured institutions
charged off USD 48.9 billion in uncollectible loans during the
quarter, up from USD 26.4 billion a year earlier.

"Deteriorating loan quality is having the greatest impact
on industry earnings as insured institutions continue to set
aside reserves to cover loan losses," FDIC Chairman Sheila
Bair said.
Reflecting the difficult times, the count of US bank
failures so far this year has crossed 80 and the numbers are
anticipated to rise in the wake of rising default.

The total assets of insured institutions declined by USD
238 billion in the second quarter.

For the second quarter, FDIC`s Deposit Insurance Fund --
used for mainly insuring bank deposits -- declined to USD 10.4
billion from USD 13 billion in the first three months of 2009.

"A decline in the fund balance does not diminish our
ability to protect insured depositors," Bair said.

Bureau Report



First Published: Thursday, August 27, 2009 - 23:27

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