Banks Having Problems Need Better Identification and Disclosure
FOD-79-1: Published: Jan 24, 1979. Publicly Released: Jan 24, 1979.
- Full Report:
The Federal Deposit Insurance Corporation (FDIC) supervises state-chartered insured banks which are not members of the Federal Reserve System and indirectly supervises state member and national banks. FDIC exists to protect both private and public depositors against losses from bank failures, help maintain confidence in the banking system, and promote safe and sound banking practices. The review of FDIC headquarters and selected regional offices focused on the analysis of examination reports and FDIC files on those state nonmember banks and mutual savings banks with supervisory or financial problems.
The overall objective of a bank examination is to determine the bank's safety, soundness, and compliance with laws and regulations. The Division of Bank Supervision defines its first priority as effectively supervising and monitoring state nonmember banks with problems. However, there is a lack of specific and objective criteria for judging whether a bank should be designated as a problem bank. Consequently, the problem bank list data, which is released as an indication of the condition of the banking industry, can be misinterpreted. For example, releasing the number of problem banks does not provide complete data on the conditions of the nation's insured banks as determined through bank examinations.
Recommendation for Executive Action
Comments: Please call 202/512-6100 for additional information.
Recommendation: For FDIC to more efficiently supervise banks and provide more meaningful data on the condition of the banking industry, the Chairman should: (1) develop more specific and objective criteria for identifying banks requiring special supervision; (2) phase out the use of problem bank data as an indicator of the condition of the banking industry; and (3) release data classifying all insured banks under the newly adopted uniform interagency rating system.