Insured deposits still in red
(27 November 2009 – USA) The US Federal Deposit Insurance Corp. (FDIC) has released its third quarter update detailing the level of expiring and past-due loans; and a still shaky financial future.
Sour loans reached a 26 year high in the third quarter, indicating that the recession and the stabilisation of the financial markets are still not yet certain.
The number of banks on the FDIC’s ‘problem list’ also reached new records coming in at 16 year highs; the number of problem banks rose from 416 on June 30th to 552 currently.
Fifty banks failed during the quarter, the largest number since the second quarter of 1990.
Loan balances plummeted and the fund that insures deposits was US$8.2 billion (A$8.88 billion) in the red.
The FDIC’s fund that insures bank deposits dropped by US$18.6 billion due to US$21.7 billion being put aside for expected losses on future bank failures.
This month the FDIC voted that banks will have to repay three years of deposit insurance premiums by the end of next month.
The move will raise around US$45 billion to replenish the dwindling deposit insurance fund, but is not considered a long-term fix.
Bank failures are expected to cost the fund US$100 billion between now and 2013.
Depositors' money, insured up to US$250,000 per account is not at risk as the FDIC has the option of tapping a credit line with the Treasury Department.
Sheila Bair said that there is no question that credit availability is an important issue for the economic recovery; the country needs to see banks making more loans to their business customers.
Bank profits returned in the third quarter after a US$4.3 billion loss in the previous quarter and US$879 million in earnings last year. But analysts warned not to read much into the better earnings.
Daniel Alpert, managing director of the New York investment bank Westwood Capital LLC, said that a few very large banks are making a pile of money, and the rest of the industry is hurting.
The number of banks on the FDIC’s ‘problem list’ also reached new records coming in at 16 year highs; the number of problem banks rose from 416 on June 30th to 552 currently.
Fifty banks failed during the quarter, the largest number since the second quarter of 1990.
Loan balances plummeted and the fund that insures deposits was US$8.2 billion (A$8.88 billion) in the red.
The FDIC’s fund that insures bank deposits dropped by US$18.6 billion due to US$21.7 billion being put aside for expected losses on future bank failures.
This month the FDIC voted that banks will have to repay three years of deposit insurance premiums by the end of next month.
The move will raise around US$45 billion to replenish the dwindling deposit insurance fund, but is not considered a long-term fix.
Bank failures are expected to cost the fund US$100 billion between now and 2013.
Depositors' money, insured up to US$250,000 per account is not at risk as the FDIC has the option of tapping a credit line with the Treasury Department.
Sheila Bair said that there is no question that credit availability is an important issue for the economic recovery; the country needs to see banks making more loans to their business customers.
Bank profits returned in the third quarter after a US$4.3 billion loss in the previous quarter and US$879 million in earnings last year. But analysts warned not to read much into the better earnings.
Daniel Alpert, managing director of the New York investment bank Westwood Capital LLC, said that a few very large banks are making a pile of money, and the rest of the industry is hurting.
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