US problem banks at 15-year high

The number of problem US banks rose to the highest level in 15 years between April and June, the industry’s regulator has revealed.

The Federal Deposit Insurance Corporation (FDIC) said 416 banks had failed its test criteria during the quarter, up 111 from January to March.

It added that 81 US banks had now been forced to close this year.

The FDIC judges banks on criteria such as the quality of their outstanding loans and the reserve funds they hold.

‘Difficult process’

The regulator said that due to the large number of failed banks, its deposit insurance fund – which safeguards up to $250,000 (£154,000) per personal bank account – had fallen by 20% between April and June to $10.4bn (£6.4bn).

While this was the lowest the fund has been since 1992, FDIC chairman Sheila Bair said she had no plans as yet to ask the Treasury for more funds.

However, she said it was likely that banks would have to pay an additional fee to help replenish the fund.

Ms Bair said the banking industry “can look forward to better times ahead”.

“But for now, the difficult and necessary process of recognizing loan losses and cleaning up balance sheets continues to be reflected in the industry’s bottom line,” she added. –BBC News