Wednesday, October 13, 1999
Losses rise for FDIC
BY MARCY GORDON
The Associated Press
WASHINGTON — The Federal Deposit Insurance Corp. (FDIC) says bank failures this year are expected to generate the insurance fund's biggest losses since the regional banking crises of the early 1990s.
The FDIC estimates that so far this year, five bank failures will cost the insurance fund $760 million. Much of the loss was caused by the failure of a big West Virginia bank.
While the FDIC still has plenty of money to cover losses to depositors, the fail ures bolster recent warnings by regulators that some banks might need to tighten lending.
U.S. Comptroller of the Currency John D. Hawke, who oversees nationally chartered banks, told a bankers group this week that regulators see some signs of risk spreading in the banking industry despite high earnings and hefty assets.
Tuesday, the Federal Reserve, the FDIC and two other regulatory agencies told banks and thrifts that they would come under closer scrutiny by examiners if they made too many risky home-equity loans that let consumers borrow more than their home's value.
The new loans, known as high loan-to-value residential loans, have become increasingly popular in recent years.
Bank, thrifts and consumer finance companies have been in a heated competition for the new loans, which are marketed primarily as a way for consumers to consolidate their debts. The loans break the rules of traditional financing by letting homeowners borrow as much as 125 percent of their home's value.
In some cases, examiners may ask banks or thrifts to sell their high loan-to-value loans or to raise more capital, the regulators said.
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Losses rise for FDIC
