FDIC Raises Estimate of Bank Failures
A record number of banks--up to 160--will either fail or need government assistance by the end of the 1986, the chairman of the Federal Deposit Insurance Corp. said Thursday.
William Seidman said that between 140 and 160 banks will either fail or fall into the help-required category this year, up from last year’s record of 120.
The FDIC is the agency that insures deposits of up to $100,000 for about 15,000 commercial and savings banks nationwide. At the beginning of the year, Seidman said, officials had estimated that about 120 banks would either fail or need assistance in 1986.
In a speech to the United States League of Savings Institutions, Seidman said the midyear adjustment reflects “the continuing increase in the number of institutions being added to the FDIC’s problem bank list and the actual number of failures so far this year.”
The agency has a policy of refusing to publicly divulge the names of troubled financial institutions.
Bank failures and assistance transactions are running ahead of last year. As of June 9, the number reached 55, surpassing the 43 failures and interventions during the same period in 1985, Seidman said. He said that slightly more than 1,300 banks are on the FDIC’s problem bank list today, up from 1,140 at the end of 1985.
Seidman said the increase in the number of banks on the problem list reflects asset problems confronting oil and gas lenders, continuing weakness in agricultural areas and softness in the real estate market.
In a separate statement, the FDIC said that while potential failures among agricultural lenders were included in the agency’s original estimate of 120 problem institutions, “the sharp decline in oil prices and related impacts on the real estate markets were not fully anticipated.”
Seidman said the FDIC’s costs on the high number of failures or assistance transactions are estimated to approach $1 billion. Also, he said, the agency will acquire $3 billion in loans and other assets from failed banks that will require liquidation.
Despite the addition of those troubled loans to its liquidation portfolio, Seidman predicted that the FDIC insurance fund will continue to grow, due largely to interest earned on the agency’s investments.
