May see bigger US bank failures in future: FDIC


Posted at Jun 05 2008 10:42 PM | Updated as of Jun 06 2008 06:42 AM


WASHINGTON - Future US bank failures linked to the downturn in the real estate market may include "institutions of greater size" than in the recent past, Federal Deposit Insurance Corp Chairman Sheila Bair said on Thursday.

In testimony prepared for a Senate Banking Committee hearing on the state of the banking industry, Bair said an increasing number of problem banks face high exposure to commercial real estate and construction lending.

"There is also the possibility that future failures could include institutions of greater size than we have seen in the recent past," Bair said. "Uncertainties in today's economic environment continue to pose significant challenges for the banking industry, households, and bank regulators."

The FDIC, which has about $52.8 billion in its deposit insurance fund, has launched a review of its risk-assessment rates for larger banks to determine if they reflect current conditions, she said.

"The agency plans to examine, among other issues, whether changes in how long-term debt issuer ratings are used to determine premium rates can improve the assessment system's effectiveness in capturing risks posed by large institutions."