Friday, June 18, 2010

Who Do We Believe? FDIC says bank failures are likely to peak in the third quarter

FDIC to give update on cost of bank failures

Wed, Jun 16 2010

Reuters

WASHINGTON (Reuters) - U.S. regulators will give an update next week on what they believe will be the total cost of cleaning up the wreckage of bank failures.

The Federal Deposit Insurance Corp said its board would meet on Tuesday to update loss and income estimates for its insurance fund. The fund covers the cost of putting failed banks into receivership and insures accounts of up to $250,000.

The last estimate was that bank failures would cost the agency's insurance fund about $100 billion from 2009 to 2013.

Since the beginning of 2009, 247 U.S. banks have failed, many of them small institutions overcome by bad commercial real estate loans.

Regulators have said bank failures are likely to peak in the third quarter, but the FDIC is already seeing some encouraging signs of recovery in community banking.

The agency has said more interested buyers are coming to auctions for failed banks, meaning the troubled loans are becoming more desirable.

The FDIC has also scaled back its loss-share agreements, which it entered into with potential buyers of failed banks to hive off some of the risk.

FDIC Chairman Sheila Bair has said small banks have recently been able to raise more capital, helping some institutions avoid failure altogether.


Bank failures have driven the FDIC's insurance fund balance into the negative. However, it had banks prepay three years of fees -- worth about $45 billion -- to give the agency enough cash to handle bank failures.

(Reporting by Karey Wutkowski; Editing by Lisa Von Ahn)