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August 27, 2008

Rise in the number of troubled US banks

by Gill Montia

Story link: Rise in the number of troubled US banks

The Federal Deposit Insurance Corporation (FDIC) of the US has reported that its list of troubled US banks has risen from 90 to 117.

The corporation is an independent agency of the federal government which guarantees customer deposits in US banks.

Its latest quarterly list of troubled banks is the longest since mid-2003 and Sheila Bair, who chairs the organisation, has warned that more banks will be coming onto the list as credit problems worsen.

Since the beginning of the year, nine US banks have collapsed and the outlook for the coming months has prompted the FDIC to consider plans to replenish its Deposit Insurance Fund (DIF).

The failure of IndyMac and other banks left the DIF balance at $45.2 billion (£24.4 billion) at the end of June, down from $52.8 billion (£28.6 billion) at the end of the first quarter of the year.

IndyMac was the third largest failure of a high-street bank since the FDIC was formed in 1933, in response to the thousands of bank failures that occurred in the 1920s and early 1930s.

Banks will no doubt be expected to increase their contributions to the fund and the corporation says it will be examining ways of ensuring that the rates applied reflect risk strategies.

 

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