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FDIC Problem Bank List

Definition

In American finance, the FDIC problem bank list is a confidential list created and maintained by the Federal Deposit Insurance Corporation which lists banks that are in jeopardy of failing. The list is closely monitored, and if problems continue with a listed bank, the FDIC takes control of the bank; it may then sell the problem bank to a stronger one, or liquidate the bank and pay off the depositors.

What is 'FDIC Problem Bank List'

A list of commercial banks in the U.S. that are considered to be in financial difficulty. The Federal Deposit Insurance Corporation (FDIC) issues this problem list quarterly based on liquidity, capital levels and asset quality. Only institutions that are insured by the FDIC through the Deposit Insurance Fund (DIF) are included on the list. The actual names of the banks are not given, but the total assets are provided.

Explaining 'FDIC Problem Bank List'

Problem institutions are chosen based on financial and operational criteria. The banks are given a ranking from one to five, with one being the most sound and five being the least. In order to be considered a four or five (a problem bank) the institution must have financial, managerial or operational weaknesses that threaten its continuing financial viability. The number of banks on the list are used to evaluate the strength of the financial industry as a whole. The banking industry is then used as a lagging indicator for the overall economy.


Further Reading


A multivariate statistical analysis of the characteristics of problem banks
onlinelibrary.wiley.com [PDF]
… The composition of the problem‐bank group based on degree of insurance risk to the FDIC is: Problem Class, Number of Problems, Percentage. Potential Payoff (PPO), 2, 1.8. Serious Problem (SP), 14, 12.7. Other Problem (OP), 94, 85.5. 110, 100.0 …

Establishing on-site bank examination priorities: An early-warning system using accounting and market informationEstablishing on-site bank examination priorities: An early-warning system using accounting and market information
www.jstor.org [PDF]
… The composition of the problem‐bank group based on degree of insurance risk to the FDIC is: Problem Class, Number of Problems, Percentage. Potential Payoff (PPO), 2, 1.8. Serious Problem (SP), 14, 12.7. Other Problem (OP), 94, 85.5. 110, 100.0 …

Identifying" Problem" Banks: How Do the Banking Authorities Measure A Bank's Risk Exposure?Identifying" Problem" Banks: How Do the Banking Authorities Measure A Bank's Risk Exposure?
www.jstor.org [PDF]
… The composition of the problem‐bank group based on degree of insurance risk to the FDIC is: Problem Class, Number of Problems, Percentage. Potential Payoff (PPO), 2, 1.8. Serious Problem (SP), 14, 12.7. Other Problem (OP), 94, 85.5. 110, 100.0 …

Troubled banks: Why don't they all failTroubled banks: Why don't they all fail
heinonline.org [PDF]
… The composition of the problem‐bank group based on degree of insurance risk to the FDIC is: Problem Class, Number of Problems, Percentage. Potential Payoff (PPO), 2, 1.8. Serious Problem (SP), 14, 12.7. Other Problem (OP), 94, 85.5. 110, 100.0 …

Using accounting proxies of proprietary FDIC ratings to predict bank failures and enforcement actions during the recent financial crisisUsing accounting proxies of proprietary FDIC ratings to predict bank failures and enforcement actions during the recent financial crisis
journals.sagepub.com [PDF]
… The composition of the problem‐bank group based on degree of insurance risk to the FDIC is: Problem Class, Number of Problems, Percentage. Potential Payoff (PPO), 2, 1.8. Serious Problem (SP), 14, 12.7. Other Problem (OP), 94, 85.5. 110, 100.0 …

Market discipline in regulating bank risk: New evidence from the capital marketsMarket discipline in regulating bank risk: New evidence from the capital markets
www.jstor.org [PDF]
… The composition of the problem‐bank group based on degree of insurance risk to the FDIC is: Problem Class, Number of Problems, Percentage. Potential Payoff (PPO), 2, 1.8. Serious Problem (SP), 14, 12.7. Other Problem (OP), 94, 85.5. 110, 100.0 …

The federal deposit insurance corporation improvement act, bank internal controls and financial reporting qualityThe federal deposit insurance corporation improvement act, bank internal controls and financial reporting quality
www.sciencedirect.com [PDF]
… The composition of the problem‐bank group based on degree of insurance risk to the FDIC is: Problem Class, Number of Problems, Percentage. Potential Payoff (PPO), 2, 1.8. Serious Problem (SP), 14, 12.7. Other Problem (OP), 94, 85.5. 110, 100.0 …



Q&A About FDIC Problem Bank List


What does it mean to be on the FDIC Problem Bank List?

To be placed on the FDIC Problem Bank List means that a bank has received a CAMELS rating of 4 or 5 from bank examiners. Banks with ratings of 4 or 5 are considered to be at risk for failure.

How much must someone deposit into his or her checking account before being considered part of this list?

Deposits must be greater than $250,000 before being considered part of this list because deposits less than $250,000 would only provide enough money for one person's daily withdrawals and would therefore not help prevent runs on banks which could cause them to fail financially and close down permanently if there was no additional cash available when needed because too many people tried withdrawing all of their money at once.

What is the FDIC Problem Bank List?

The Federal Deposit Insurance Corporation (FDIC) issues this problem list quarterly based on liquidity, capital levels and asset quality. Only institutions that are insured by the FDIC through the Deposit Insurance Fund (DIF) are included on the list. The actual names of the banks are not given, but the total assets are provided.

How many banks were listed as being in danger of failure in April 29, 2011?

There were 252 financial institutions included on the problem bank list at that time.

Which element(s) of capital does CAMELS rate each institution on?

Capital, Assets, Management, Earnings, and Liquidity are rated individually from 1 to 5 with 1 being best and 5 being worst. A composite rating is then assigned based on all five elements and banks in two lowest categories are placed on the FDIC's problem bank list.

Why is it important for banks to maintain adequate funds in their checking accounts?

Banks need sufficient funds available so that depositors can withdraw cash from their accounts if needed without causing problems for other customers who may also want to withdraw cash from their accounts at approximately the same time. This helps prevent runs on banks which can cause them to fail financially and close down permanently if there is not enough money available when needed because too many people try to get their money out at once.

What does "only institutions that are insured by the FDIC through the Deposit Insurance Fund (DIF)" mean?

Only institutions that have a balance of $250,000 or more in their checking accounts at a bank insured by DIF will be listed as having an account with a bank on this list. If they do not have enough money to cover all of their checks written during any one day, then they will be considered to be in financial difficulty.

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