Report on FDIC’s Losses Criticizes U.S. Comptroller

Banks regulated by a Treasury Department agency account for a disproportionate share of losses to the government’s deposit insurance fund, according to a congressional study released Sunday.

The agency criticized--the Office of the Comptroller of the Currency--immediately challenged the report as invalid.

The report, prepared by the staff of the House Banking Committee, looked at the 1,009 bank failures between Jan. 1, 1986, and June 30 of this year.

It allocated the $24.9 billion in losses caused by the failures among three regulatory agencies, depending on which was the lead supervisor of the failed banks.

It then subtracted the insurance premiums paid by all banks--failed and solvent--from gross losses to come up with net losses to the fund of $12.5 billion.

Banks supervised by the comptroller’s office, which oversees nationally chartered institutions, accounted for 73% of the net losses but only 54% of the average industry assets of $3.27 trillion over the period, the study said.

Rep. Henry B. Gonzalez (D-Tex.), chairman of the committee, said Comptroller Robert Clarke’s policy of focusing bank examinations on specific problem areas in a bank rather than conducting full-scale examinations was the cause of the disproportionate losses.

“The other two bank regulators --the Federal Reserve Board and the Federal Deposit Insurance Corp.-- . . . relied on full-scope examinations in a majority of cases,” Gonzalez said in a statement.

FDIC-supervised banks accounted for 30% of the industry’s assets and 35% of the insurance fund’s net losses. Federal Reserve Board-supervised banks accounted for 16% of the assets and none of the net losses because they paid $1 billion more in premiums than the cost of their failures.

Lee Cross, a spokeswoman for the comptroller’s office, said Gonzalez’s use of net losses skewed his results. Many of the largest banks supervised by the comptroller rely on foreign deposits and other non-deposit borrowing to finance their activities and thus pay proportionately lower insurance premiums.

She pointed out that gross losses to the insurance fund as a percentage of assets was virtually identical between the comptroller’s office, 0.1484%, and the FDIC, 0.1485%.

The Federal Reserve’s ratio was lower, 0.0177%, but it supervised few banks in Texas and the Southwest, which accounted for the majority of bank failures in the 1980s.