The Problem Bank List Continues to Swell

The number of banks and thrifts on the "problem bank list" rose to 416 in Q2 2009, a large (but not surprising) jump from 305 in Q1 2009.

The "problem bank list" is a list of US banks and thrifts that are deemed to be in poor shape by regulators. Inclusion on the "problem bank list" means that a bank or thrift must take dramatic action to remedy their current situation or risk being taken over by the FDIC (Federal Deposit Insurance Corporation).

How does a bank find itself on the "problem bank list"?

Every 12-18 months, every bank and thrift in the United States is scrutinized by a number of examiners. Every aspect of the bank's current situation is taken into consideration - cash on hand, risk management policies, number of delinquent loans, etc.

The bank or thrift is then given a score out of 5, with 1 being the best and 5 being the worst.

If a bank or thrift receives a score of 4 or worse, then they are automatically included on the "problem bank list".

Banks or thrifts that receive poor scores are then told what they must do to remove themselves from the list, and what might happen if they don't.

A bank appearing on the "problem bank list" doesn't necessarily mean that they are going to fail - rather, it's simply a warning that changes must be made.

Also, a bank won't necessarily appear on the "problem bank list" prior to failing. For instance, a bank could see its financial position deteriorate so rapidly that they might go under in just a few short months. Given that banks are examined every 12-18 months, you can see why some banks might not appear on the list prior to failing.

The banks and thrifts that appear on the "problem bank list" are not made available to the public.

Why?

Regulators are looking to avoid bank runs that would likely result from this information being made public. These banks are already in a very precarious financial position, and a "run on the bank" would surely finish them off. This is why the information is not made public.

The number of banks on the "problem bank list" is at its highest point since June of 1994.

Many believe that Q2 2009 will represent the high water mark for the list, given that an economic recovery seems to be under way. I guess we'll have to see.

Filed under: The Economic Meltdown

12 COMMENTS - What Say You?

Comment by Monique on August 29, 2009 @ 4:04 am

It makes sense that the problem banks aren't made public, but it sure would be nice to know an examiner or, better yet, be an examiner yourself!

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Comment by Paul Walton Sr on August 31, 2009 @ 12:05 pm

Why can I not know if my bank is In Trouble!!! they sure question me.
Is this big bank business... I have the right.. if not i will put money in a safer place.

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Comment by Judy Grill on September 06, 2009 @ 3:01 pm

How do I know if BB&T is on the bank problem list?

judy@judygrill.com

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Comment by vivian mehl on September 11, 2009 @ 12:40 pm

how do i get a list of troubled banks?

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Comment by Greg Kane on October 04, 2009 @ 4:44 pm

How do I get the list?

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Comment by Jim Boswell on October 12, 2009 @ 6:55 am

I have a list made up using the FDIC's 06/30/2009 data, sorted by the banks with the greatest problem. My list consists of 287 institutions with an asset base of $187 billion. Of the seventeen banks the FDIC has shutdown since August 28, 2009 (the time the new data was made available), sixteen are on my list. If you are interested, i can email you my list. I think you might find it interesting.

jimboswell12@gmail.com

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Comment by Hugh Collns on October 17, 2009 @ 11:46 am

I would like to know if F.D.I.C. will be selling loan packages on closed bid and what would I need to do to get in on this. In the late 1980s and 90s
I was with a company that purchased these packages. I would like to get in on the collections of the F.D.I.C. paper
THANK YOU
Hugh Collins

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Comment by Frank Ehrmantraut on October 23, 2009 @ 11:40 pm

Maybe banks should turn it around and the good ones could advertize that they are not on the troubled bank list.

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Comment by Betty Doan on October 31, 2009 @ 4:49 pm

I would like to know what banks are going to fail. Our government is supposed to keep us informed. Wouldn't it be easier if we could get our money out of the bank before they closed and that would free up FDIC.

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Comment by Arthur Tobin on November 03, 2009 @ 2:38 am

Is Commonwealth Business Bank, Irvine, Ca. on the FDIC troubled or watch list.

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Comment by barry epstein on November 24, 2009 @ 2:46 pm

How can I obtain a list??

barry@mortgagewn.com

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Comment by Jerry Gensel on November 25, 2009 @ 10:08 am

Good question, Barry. Everyone is full of information, but how do you get that list.

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