"Problem Bank List" Reaches Highest Level in 18 Years

According to the FDIC (Federal Deposit Insurance Corporation), a total of 884 banks found themselves on the "problem bank list" in the fourth quarter of 2010, up from 860 in Q3/2010.

The 884 bank total means that the "problem bank list" is the longest that it has been since December 31st, 1992, when a total of 1,066 banks found themselves on the list. The Q4/2010 "problem bank list" is considerably bigger than the Q4/2009 list (702 banks).

Let’s look at the trend of "problem banks" from 1992 to 2010 (Q4 totals):

2010 - 884
2009 - 702
2008 - 252
2007 - 76
2006 - 50
2005 - 52
2004 - 80
2003 - 116
2002 - 136
2001 - 114
2000 - 94
1999 - 79
1998 - 84
1997 - 92
1996 - 117
1995 - 193
1994 - 318
1993 - 575
1992 - 1,066






7,657 institutions were insured by the FDIC during the fourth quarter of 2010, meaning that a full 11.5% of FDIC-insured institutions found themselves on the Q4 "problem bank list".

FDIC-insured institutions generated a total of $21.7 billion in aggregate profit during the fourth quarter of 2010, up substantially from the $1.8 billion net loss that was reported in the fourth quarter of 2009. Most of these Q4/2010 profits were generated by the "big banks".

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In case you were wondering if your bank is featured on the current edition of the FDIC’s "problem bank list", don’t bother trying to find out, as the list is kept strictly confidential. The FDIC won’t release this information because they don’t want you pulling your money out of a “troubled” institution.

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What is a "problem bank"?

Banks are examined every 12-18 months. Examiners will pore over the details of a bank, looking for red flags such as poor risk management policies, increasing delinquent loans, etc.

Banks are then given a score of between 1 and 5, with 1 being the best score and 5 being the worst. If a bank receives a score of 4 or worse, then they will be included on the FDIC’s "problem bank list" and told what they must do the remedy the situation.

Inclusion on the "problem bank list" does not necessarily mean that a bank will end up failing - in fact, most of the banks that make an appearance on the "problem bank list" will not end up failing.

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Source: FDIC.gov

Filed under: The Economic Meltdown