By Truman Lewis
ConsumerAffairs.Com
August 28, 2009
Federal regulators say 416 banks are now on their "problem list," up from 305 a month ago. And the Federal Deposit Insurance Corporation's (FDIC) insurance fund is at its lowest ebb since 1993. The agency has already closed 81 banks this year and its insurance fund is down to $22 billion, the lowest it's been since 1993.
But the news is not all bad, according to FDIC Chairman Sheila J. Bair. Banking performance is always a "lagging indicator," Bair said at her quarterly banking profile press conference. She said the FDIC has "ample resources" to protect depositors, even with the prospect of more banking failures in the months ahead.
Insured banks posted a $3.7 billion net loss in the second quarter, Bair said, but managed to post an anemic $424 million in net operating income after paying a special assessment of more than $5 billion to boost the FDIC's insurance fund.
Even though economic activity is beginning to pick up, deteriorating loans continue to pull banks down, hitting their highest levels in the second quarter, and Bair cautioned that both charge-offs and delinquent loan levels are still rising -- a grim indicator that the worst is yet to come. Bair noted, however, that the rate of increase was smaller than in the first quarter.
Both charge-offs and non-current loans continue to rise. Source: FDIC
Eighty-one banks have failed so far this year and, since regulators traditionally seize troubled institutions after the close of business on Friday, it's likely the list of failed banks will be a few notches higher tomorrow than it is today. Last weekend, regulators seized Guaranty Bank of Texas, the 10th-largest banking failure in U.S. history. Just a week earlier, Colonial Bank of Alabama was seized, becoming the 6th-largest failure.
What to do
Consumers should look for the FDIC emblem before making deposits in a bank or savings association.
It covers all depositors' losses up to the insurance limit in the event of a bank failure.
However, it's important that consumers keep track of their deposits to be sure that they do not exceed the amount covered by FDIC. The basic insurance amount is $250,000 per depositor, per insured bank. This includes principal and accrued interest up to a total of $250,000. The $250,000 amount applies to all depositors of an insured bank.
Deposits in separate branches of an insured bank are not separately insured. Deposits in one insured bank are insured separately from deposits in another insured bank.
Deposits maintained in different categories of legal ownership at the same bank can be separately insured. Therefore, it is possible to have deposits of more than $250,000 at one insured bank and still be fully insured. For more information on deposit insurance coverage, see the FDICs brochure Your Insured Deposits.
