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FDIC considers bolstering fund bank earnings drop
WASHINGTON (8/27/08)—Insured bank and thrift earning fell to $5 billion in the second quarter of the year as the Federal Deposit Insurance Corp. (FDIC) considers a restoration plan to bolster the Deposit Insurance Fund. The second quarter earnings figure represented an 86.5%, or $31.8 billion, decline from the $36.8 billion that the industry earned in the same time period last year, according to an FDIC release announcing the figures. With the exception of the fourth quarter of last year, the latest earnings were the lowest for the industry since the fourth quarter of 1991. The FDIC also revealed that its "problem list" grew to 117 institutions from 90 at the end of the first quarter. Total assets of problem institutions increased from $26 billion to $78 billion, with $32 billion coming from IndyMac Bank, F.S.B., Pasadena, CA, which failed in July. FDIC Chairman Sheila Bair said more banks will come on the list as credit problems worsen and assets of problem institutions also will continue to rise. In releasing the latest results, the FDIC cited higher provisions for loan losses as the primary reason for the drop in industry profits. The agency said the size of the earnings decline was mainly attributable to a few large institutions, but more than half of all insured institutions, 56.4%, reported lower net income in the second quarter. Bair announced that in early October the FDIC will consider a plan to replenish the agency's Deposit Insurance Fund (DIF), which experienced a large drop due to added loss reserves for IndyMac and other bank failures. The DIF restoration plan "likely will include an increase in the premium rates that banks pay into the fund," she said. "And we'll be proposing changes to the current assessment system that will shift a greater share of any assessment increase onto institutions that engage in high-risk behavior to encourage and reward safer behavior." Use the resource link below for more on the FDIC earning figures.
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