![Risk.net](https://www.risk.net/sites/default/files/styles/print_logo/public/2018-09/print-logo.png?itok=1TpHrpuP)
FDIC earnings report shows banks not out of the woods yet
Commerical and savings banks in the US show a net loss of $3.7 billion in the second quarter of 2009
Despite this, FDIC chairman Sheila Bair remains confident of the banks' ability to recover. "While challenges remain, evidence is building that the US economy is starting to grow again," said Bair. "Banking industry performance is - as always - a lagging indicator. The banking industry, too, can look forward to better times ahead. But, for now, the difficult and necessary process of recognising loan losses and cleaning up balance sheets continues to be reflected in the industry's bottom line."
She added: "The FDIC was created specifically for times such as these. No matter how challenging the environment, the FDIC has ample resources to continue protecting depositors as we have for the last 75 years. No insured depositor has ever lost a penny of insured deposits...and no one ever will."
The American Bankers Association also remain bullish for the future of US banks. In a statement it said: "Today's report makes clear that banks are neither at the beginning or the end of the problems presented by a difficult economy. They are in the middle, and significant challenges still remain. However, the vast majority of banks have been in existence for decades, and we have every confidence that the long-term future is positive, and that the industry will emerge from this deep recession with significant resources to continue serving local communities for many more decades to come."
Provisions for loan losses by the FDIC totalled $66.9 billion in the quarter, an increase of $16.5 billion (32.8%) over the second quarter of 2008. Extraordinary losses stemming from writedowns of asset-backed commercial paper totalled $3.6 billion, compared with extraordinary losses of $366 million a year earlier. Indicators of asset quality also continued to worsen during the second quarter.
"Deteriorating loan quality is having the greatest impact on industry earnings as insured institutions continue to set aside reserves to cover loan losses," said Bair. "Of all the major earnings components, the amount that insured institutions added to their reserves for loan losses was, by far, the largest drag on industry earnings compared with a year ago."
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@risk.net
More on Regulation
Looming US Basel endgame redraft sparks calls to save IRB
Experts say 20 years of data makes credit risk models more appropriate than standardised approach
Cool heads must guide financial regulation of climate risk
Supervisors can’t simply rely on ‘magical thinking’ of market discipline, says Sergio Scandizzo
Markets worry EU’s reporting simplification will add to burden
Rather than reducing firms’ obligations, market participants fear it could end up increasing requirements
EU banks show basic instinct for credit valuation adjustments
Simpler approach to CVA appeals even to some already using more complex models for counterparty risk
Bank of England wants dynamic Emir for UK clearing houses
Review won’t just photocopy EU legislation, as BoE seeks to make rules simpler and adaptable
Big banks could be sidelined from future rescue deals – FSB
Exacerbation of too-big-to-fail means G-Sibs could already be too large to take extra assets
More guidance, less enforcement: the SEC under Paul Atkins
Current and former insiders expect clearer crypto rules and an end to regulatory violation sweeps
During Trump turbulence, value-at-risk may go pop
Trading risk models have been trained in quiet markets, and volatility is now looming