The number of US banks on a “problem list” grew to 117 in the second quarter from 90 in the first three months of the year, the banking industry regulator said on Tuesday.
The list of troubled banks is now the largest since the middle of 2003, said the Federal Deposit Insurance Corporation (FDIC), which insures bank deposits and can take over insolvent banks.
Total assets of problem institutions increased to US$78 billion by June 30 from US$26 billion in the first quarter, the FDIC said, adding that US$32 billion of that total came from California-based IndyMac Bank, taken over by the regulator last month.
“More banks will come on the list as credit problems worsen,” FDIC chairman Sheila Bair said.
“Assets of problem institutions also will continue to rise,” she said.
Bair also announced that in early October the FDIC would consider a plan to replenish the agency’s fund, which experienced a large drop to cover losses at IndyMac and other bank failures.
The 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.”
The FDIC said profits for its 8,400 member banks plunged 86.5 percent in the second quarter compared with a year ago to US$5 billion.
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.
“By any yardstick, it was another rough quarter for bank earnings, but the results were not unexpected as the industry coped with financial market disruptions, the housing slump, worsening economic conditions and the overall downturn in the credit cycle,” Bair said.
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