FDIC Ramping Up for Bank Failures

The Federal Deposit Insurance Corporation (FDIC) is getting ready for what it anticipates will be a spike in bank failures as the regulator ramps up hiring among staff that handles that work.

According to the Washington Post last week, the FDIC is adding some 140 people – a 60 percent increase – to the unit that handles bank failures. The agency’s chief operating officer told the paper that the workers will be temporary and primarily based in the regulator’s Dallas office.

Although the FDIC has handled only five bank failures in the past 13 months, regulators believe that more will be coming soon. The FDIC refused to make projections to the Post, but did say that there were 76 banks on its “problem institutions” list.

The largest recent bank failure involved Internet-only bank NetBank, which was shuttered with $2.5 billion in assets. It was the largest failure of a thrift since the savings and loan scandal of the 1980s. The 10-year old bank’s FDIC-backed assets were sold to fellow Internet bank ING Direct.

RBC Capital Markets, an equity research firm, projects that 150 banks will fail in the next three years, far above the typical pace of about 5 per year.

The FDIC’s most failure-intensive time was at the tail end of the early 1990s recession when the regulator dealt with 502 bank failures in a three year period from 1990 to 1992.