After facing 81 bank failures in 2009 and estimates that there will be hundreds more over the next few years, U.S. regulators are stepping up their capital requirements and general scrutiny over new financial institutions in hopes of minimizing the growing number of bank failures.
In a recent letter to banks, the Federal Deposit Insurance Corporation stated that it was extending the number of years that new state non-member banks will face the enhanced regulations from three years to seven banks. These institutions which have been open for less than seven years will face more frequent examinations than other institutions to make sure that the banks maintain their liquidity and are financially sound.
In the financial institution letter that the FDIC sent out, they stated, “Recent experience has demonstrated that newly insured institutions pose an elevated risk to the FDIC.”
As of August 28th, 2009, state and federal regulators have closed down 81 banks, with many more expected failures to come. The FDIC stated that it currently has 416 banks on its “problem list”, up from 305 at the end of March. Currently the FDIC’s insurance fund is at its lowers balance since 1993.
