Slowdown in Bank Failures Will Prompt 3,300 Layoffs at FDIC : Financial institutions: Some offices will be closed. Deposit insurance fund is now firmly in the black.
Citing the sharp decline in bank failures and the improving health of the nation’s banks, the Federal Deposit Insurance Corp. said it will lay off 3,300 temporary workers over the next two years. The workers were hired to help dispose of the assets of failed banks.
FDIC Acting Chairman Andrew C. Hove told reporters Saturday that the FDIC will also close 17 of its 22 asset liquidation offices over the next two to three years, depending on how quickly seized assets can be sold. The layoffs represent half the workers now assigned to the liquidation process.
Bank failures have slowed dramatically, dropping to 39 so far this year from an annual average of 200 a few years ago, Hove told an American Bankers Assn. gathering here. Most of the failures this year have been relatively small, with aggregate assets of $3 billion.
As a result, the the federal fund that insures bank depositors against loss is now solidly in the black, totaling $10.5 billion in September, or 0.56% of the nation’s insured deposit liability. That compares to a negative balance of $7 billion in 1991.
Unlike the bailout of failed thrifts, paying off depositors at failed banks has involved the use of no taxpayer funds, Hove said.
Increases in FDIC premiums paid by banks have also boosted the fund called the Bank Insurance Fund. Bankers now pay up to 31 cents for each $100 on deposit for their FDIC coverage.
Nevertheless, bankers won’t see a drop in their FDIC insurance premiums until the fund reaches a mandated target of 1.25% of insured deposits nationwide. That will take several more years, Hove said.
The dominant themes of this year’s bankers convention are the accelerating consolidation of banks, tougher fair lending laws, banks’ declining share in the financial services market and increased securities trading by banks.
In talks before the convention, Hove and Comptroller of the Currency Eugene A. Ludwig spoke strongly in favor of the trend toward bank consolidation and mergers. But Hove voiced concerns that as banks get bigger, small businesses may find it more difficult to get loans.
“There are only large banks in France and there’s not much credit available for small businesses there,” Hove said.
