Last week regulators closed seven banks, one of which was here in Phoenix, First Arizona Savings, for which the FDIC could find no buyer. The FDIC will cover First Arizona Savings (FAS) depositors up to $250,000 each; however, depositors with accounts in excess of $250,000 stand to lose collectively $5.8 million. In the banking world, FAS was a small fish, but the losses to individual depositors will not be small.
While it is rare deposits in excess of $250,000 result in losses when banks get in trouble, the FAS failure shows that it does happen.
The Office of Thrift Supervision, which supervises savings banks, issued a Cease and Desist Order to FAS November 2, 2009. The order prohibited certain actions by FAS and required an increase in capital. FAS was unable to raise additional capital, and last week became US bank failure #139 this year. There were 140 bank failures in 2009.
The Cease and Desist Order would have been a red flag to FAS depositors—had they known. However, banks that receive Cease and Desist Orders are not required to notify their customers that they have received such orders. So, how are depositors to learn when their banks get in trouble?
Banks with serious problems that have been uncovered by regulators usually make it to the FDIC’s Problem Bank List. However, the FDIC does not loudly broadcast the existence of the list, or additions and deletions to it. Considering the increasing number of banks on the list, it is surprising that the list is not given more attention by the media. [Actually, it’s not surprising.] As of the latest report released by the FDIC, there were 829 problem banks as of June 30, 2010, up from 775 on March 31.
Readily available on the FDIC website is the Failed Bank List, an “after the fact” list. The horse is out of the bank, no need to close the door now. What bank depositors need is access to the FDIC’s Problem Bank List, which not that easy to find. In a search of the FDIC website for Problem Bank List, I couldn’t find it.
However, calculatedriskblog.com maintains an unofficial list of problem banks, with this disclaimer:
This is an unofficial list, the information is from public sources and while deemed to be reliable is not guaranteed. No warranty or representation, expressed or implied, is made as to the accuracy of the information contained herein and same is subject to errors and omissions.
People who hold deposits in excess of FDIC insurance coverage at institutions that do not fall under “the too big to fail” umbrella need to monitor the financial health of their banks through whatever means they can. www.problembanklist.com and www.calculatedriskblog.com are good places to start. At www.problembanklist.com you can subscribe to weekly emails that mostly report on banks that have been closed. Interesting, but not of much value if the horse has already bolted the barn.