OLDWICK, N.J. - (Business Wire) The Federal Deposit Insurance Corp. (FDIC) has been called in as receiver for eight banks through August 4, 2008, following the closure of four institutions in 2007. Prior to the recent closings, the FDIC had not been appointed as receiver for a failed bank since 2004. Regulators expect bank failures in the near term to increase, partly due to some banks
’ concentration in real estate loans and construction and development lending.
- In July, IndyMac Bank FSB was closed by the Office of Thrift Supervision, representing the nation’s largest ever failure of a thrift institution.
- The closing of IndyMac Bank FSB, now known as IndyMac Federal Bank FSB, is expected to cost the FDIC’s deposit insurance fund from $4 billion to $8 billion.
- IndyMac’s failure also will likely reduce the deposit insurance fund’s reserve ratio to less than 1.15%, necessitating a restoration plan for the fund by the FDIC.
- The number of institutions on the FDIC’s problem list—90 as of first quarter 2008—has risen for six straight quarters after hitting a low of 47 at the end of third quarter 2006.
- The banking industry’s coverage ratio, or ratio of capital and loan loss reserves to problem assets, fell to 89 cents in reserves for every $1 of noncurrent loans in first quarter 2008, its lowest level since first quarter 1993.
- The FDIC may consider advances from the Federal Home Loan Banks in the assessment base used to set premiums banks pay in to the deposit insurance fund.
- Regulators issued final guidance in July for covered bonds, clarifying how the bonds would be treated in the event the FDIC was appointed receiver of a failed bank.
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