Struggling banks give FDIC ‘heartburn’

May 30, 2008 @ 2:42 pm

By Andrew Coen

The U.S. banking industry had one of its most negative quarters in recent memory and its struggles are likely to continue for the remainder of the year, the Federal Deposit Insurance Corp. warned.

Commercial banks and savings institutions insured by the FDIC reported a net income of $19.3 billion in the first quarter, a 46% decline from the year-ago period, according to the regulator.

Loan-loss reserves increased 18%, or $18.5 billion, for the largest quarterly increase in more than two decades.

The coverage ratio, which measures a company’s ability to cover debt obligations, fell for the quarter from 93 cents to 89 cents in reserves for every $1 of non-current loans, the lowest level since 1993.

“This is a worrisome trend,” Sheila C. Bair, chairwoman of the FDIC, said in a statement. “It's the kind of thing that gives regulators heartburn.”

Given the financial troubles forecasted for the rest of the year, Ms. Bair said the FDIC is urging the financial services firms it regulates to make sure they have enough reserves to cover expected losses.


What do you think?

View comments

Recommended for you

Sponsored financial news

Featured video


Federated's Orlando: The economic and financial midyear outlook

As a country, are we stuck in neutral? Federated's Phil Orlando explains what he believes needs to happen to create an economic surge. (Hint: It rhymes with "crump.")

Video Spotlight

Will It Last As Long As Your Clients Do?

Sponsored by Prudential

Video Spotlight

The Catalyst

Sponsored by Pershing

Latest news & opinion

Brian Block's $4 million bonus was tied to a key metric at ARCP

Prosecution rests case in fraud trial against CFO of American Realty Capital Properties.

Edward Jones is winning the Google search war

Brokerage firm's digital marketing investment helps land it at the top of local and overall search engine results, report finds.

Voya's win in 401(k) fee suit involving Financial Engines bodes well for other record keepers

Fidelity, Aon Hewitt and Xerox HR Solutions are currently defending against similar fiduciary-breach claims.

Collective investment trusts getting more attention from 401(k) advisers

The funds are catching on due largely to lower costs and more product availability, but come with some inherent drawbacks.

Vanguard rides robo-advice wave to $65B in assets

Personal Advisor Services, four times the size of its closest competitor, combines digital and human touch.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print