Posted on 08/30/2009 12:11:43 AM PDT by bruinbirdman
New banks will be kept under strict supervision for a longer period of time because they are failing at a higher rate than more established lenders, US regulators said on Friday.
The new policy from the Federal Deposit Insurance Corporation comes as regulators try to cope with a rising number of bank failures as the recession takes its toll.
New lenders – those who have been insured less than seven years – have been ‘’over represented’’ on the list of institutions that failed during 2008 and 2009 and they pose an ‘’elevated risk’’ to the fund that protects depositors, the FDIC said in a letter to banks.
So far this year, 82 banks have failed in the US. But the number of so-called ‘’problem’’ banks at risk of failing has jumped to 416, a 15-year high.
Meanwhile, the FDIC’s deposit insurance fund, which insures up to $250,000 per depositor in each bank, has fallen to $10.4bn, a level not seen since 1993 when the US was in the midst of the savings and loans crisis.
Currently, new lenders face more frequent examinations and higher capital requirements during the first three years, but they will now be subject to such scrutiny for a seven-year period.
They will also have to get prior approval from the FDIC if they want to make ‘’material changes’’ to their business plans.
That is because newly insured institutions “have pursued changes in business plans during the first few years of operation, which, in some cases, have led to increased risk and financial problems where accompanying controls and risk management practices were inadequate,” the FDIC said in the letter.
In particular, new lenders have suffered from rapid growth, over-reliance on volatile funding, including brokered deposits, significant deviations from approved business plans, and weak risk management practices, the FDIC said.
They're going to spread out the bankruptcies over a longer time?
Exactly, no joke.
Anybody that has money in banks are playing with fire. During the Great Depression, banks just closed their doors and no one could get their deposits. The banks just kept the money.
Kinda like what the banks are doing with all those non-foreclosure foreclosures they are keeping off the books.
yitbos
No reason to panic the herd.
Bankers watch as Sweden goes negative [interest rate]
yitbos
funny. it was $10 billion in june.
wine from water dollars from dust? 0bama is a miracle worker! he's sooo supa smaht!
/sarc
The Financial Times writes:
“New lenders – those who have been insured less than seven years – have been ‘over represented’ on the list of institutions that failed during 2008 and 2009, and they pose an ‘elevated risk’ to the fund that protects depositors, the FDIC said in a letter to banks.”
This is “Financial Profiling.”
The FDIC is trying to predict future risk based on a statistical relationship to past performance.
If this is not a criminal offense in the Obama administration, it soon will be.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.