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