The FDIC published its quarterly banking profile on Thursday, and it appears that while things are certainly pretty dismal (its fund is down to $10.4bn from $13.bn over in the quarter) the agency is not exactly about to go bust anytime soon.
In fact, the agency reckons the fund movement is somewhat irrelevant as it still has the ability to borrow up to another $500bn from the US Treasury.
Here’s the relevant bit of the statement (our emphasis):
Total reserves of the Deposit Insurance Fund (DIF) stood at $42 billion. Just as insured institutions reserve for loan losses, the FDIC has to provide for a contingent loss reserve for future failures. To the extent that the FDIC has already reserved for an anticipated closing, the failure of an institution does not reduce the DIF balance. The contingent loss reserve, which totaled $28.5 billion on March 31, rose to $32.0 billion as of June 30, reflecting higher actual and anticipated losses from failed institutions. Additions to the contingent loss reserve during the second quarter caused the fund balance to decline from $13.0 billion to $10.4 billion. Combined, the total reserves of the DIF equaled $42.4 billion at the end of the quarter. Chairman Bair distinguished the DIF’s reserves from the FDIC’s cash resources, which included $22 billion of cash and U.S. Treasury securities held as of June 30, as well as the ability to borrow up to $500 billion from the Treasury. “A decline in the fund balance does not diminish our ability to protect insured depositors,” Chairman Bair concluded.
Although, that’s not to say the figures should not concern us.
The number of problem banks and thrifts on the FDIC’s watchlist rose sharply to 416 in the second quarter from 305 in the first. Meanwhile, guaranteed institutions reported a net loss of $3.7bn.
You can view all the figures here.
Related links:
Bove braced for (many) more bank failures - FT Alphaville
FDIC, the ‘F’ stands for… - FT Alphaville