FDIC Problem Bank List is a confidential list, published by the Federal Deposit Insurance Corporation (FDIC) every quarter, of U.S. banks and thrifts that are on the brink of financial insolvency.
Key Takeaways
FDIC Problem Bank List is a confidential list, published by the Federal Deposit Insurance Corporation (FDIC) every quarter, of U.S. banks and thrifts that are on the brink of financial insolvency.
Only institutions that are insured by the FDIC through the Deposit Insurance Fund are on the FDIC Problem Bank List.
If problems continue with a listed bank, the FDIC takes control of it, before selling it to a stronger bank, or liquidating it and refunding the depositors.
Understanding FDIC Problem Bank List
To make the FDIC problem bank list, a bank must have financial, managerial or operational weaknesses that threaten its continued financial viability. Only institutions that are insured by the FDIC through the Deposit Insurance Fund are on the FDIC Problem Bank List. If problems continue with a listed bank, the FDIC takes control of it, before selling it to a stronger bank, or liquidating it and refunding the depositors.
The criteria to gauge the solvency of the member banks is based on the FDIC's CAMELS rating system. CAMELS is an acronym for:
Since making this information public might start runs on banks, the names of the banks are withheld from the list. While the FDIC Problem Bank List is not available to the public, the FDIC does make public how many institutions are on the list as part of its wider banking survey.
The FDIC Problem Bank List includes data for net interest margins, net income, and net trading revenue. It also includes data on lending levels (outstanding loans) and asset quality — such as the level of nonperforming assets, net charge-offs (actual loan losses), and loan loss provisions.
FDIC Problem Bank List and Bank Failures (2001 - 2020)
At the peak of the financial crisis in 2009, there were nearly 900 troubled institutions on the FDIC Problem Bank List. By 2018, this had fallen below 100.
As expected, there is a strong correlation between the FDIC Problem Bank List and the actual number of bank failures. According to FDIC, a look at bank failures since 2001 shows that the peak was reached in 2010, when 157 FDIC insured banks failed as a result of the 2008 financial crisis. With that number dwindling to 0 by 2018, though it showed a slight uptick to 4 in 2019.
2023 Bank Failures
On March 10, 2023, the FDIC took control over California-based Silicon Valley Bank and its $212 billion in assets. The bank had suffered a sustained bank run after losing nearly $2 billion on the sale of its Treasury portfolio. Many of the bank's clients were start-ups or tech companies with deposits much higher than the FDIC's insurance limit.
Rather than limit coverage to the $250,000 limit, the FDIC announced that all depositors would be made whole, a message intended to calm the rumors of an oncoming banking panic. A second institution, Signature Bank in New York, was also placed in receivership with the same protections.
What Does the FDIC Insure?
The FDIC, or Federal Deposit Insurance Corporation, provides insurance on bank deposits in the event of bank failure. The funds for this insurance are provided by member banks, which pay into a special insurance pool.
How Much Does the FDIC Insure?
Bank deposits at FDIC-insured institutions are guaranteed up to at least $250,000 at each institution. Note that this protection is per person, not per account. If a single person has multiple accounts at the same bank, they will only receive up to $250,000 in guaranteed deposit insurance.
What Happens if a Bank Goes Bankrupt?
If an FDIC-insured bank fails, the FDIC will place that institution in receivership and take control of its assets. Deposits are guaranteed up to $250,000 per customer, but uninsured deposits may be recouped through the liquidation of the bank's assets. The FDIC may also choose to extend deposit protection beyond the $250,000 limit, as it did in 2023 with the collapse of Silicon Valley Bank.
The Bottom Line
The FDIC Problem Bank List is used to keep track of depositary institutions at high risk of insolvency. This is based on criteria like the quality of the bank's assets, capital adequacy, and the strength of its management team. Although the banks on the list are confidential, the FDIC does publish the number of banks on the list and the size of their assets.
The FDIC Problem Bank List includes data for net interest margins, net income, and net trading revenue. It also includes data on lending levels (outstanding loans) and asset quality — such as the level of nonperforming assets, net charge-offs (actual loan losses), and loan loss provisions.
There has only been one bank failure so far in 2024. Republic First Bank (Philadelphia), which did business as Republic Bank, failed April 26. That was the first Federal Deposit Insurance Corp. (FDIC) bank to fail since Citizens Bank of Sac City, Iowa failed in November 2023.
A bank is considered a "problem bank" by the FDIC when its CAMELS composite rating is 4 or 5. The CAMELS scale measures a bank's capital adequacy, asset quality, management, earnings, liquidity and sensitivity on a scale of 1 to 5, with 5 being the worst.
There are now 63 financial institutions on the FDIC's Problem Bank List. The FDIC recently updated its Problem Bank List, which currently includes 63 U.S. financial institutions selected for special monitoring. So far in 2024, only one financial institution has failed, following five such failures in 2023.
The banks of greatest concern are Flagstar Bank and Zion Bancorporation, according to the screener. Flagstar Bank reported $113 billion in assets with a total CRE of $51 billion. The bank, however, only had $9.3 billion in total equity, making its total CRE exposure 553% of its total equity.
JPMorgan Chase, the financial institution that owns Chase Bank, topped our experts' list because it's designated as the world's most systemically important bank on the 2023 G-SIB list. This designation means it has the highest loss absorbency requirements of any bank, providing more protection against financial crisis.
186 Banks Are in Danger of Failing? A report posted on the Social Science Research Network found that 186 banks in the United States are at risk of failure or collapse due to rising interest rates and a high proportion of uninsured deposits.
One question that often arises is, "Are Credit Unions Safer than Banks?" If you're looking for a short answer, you'll be happy to know that we're not making you read the whole post: Credit Unions and banks are roughly identical in safety because deposits at both are insured by the Federal government to $250,000.
Getting on the list. To get onto the FDIC problem bank list, a bank must receive a CAMELS rating by bank examiners of “4” or “5.” The CAMEL rates each element of Capital, Assets, Management, Earnings, and Liquidity from “1” to “5,” with “1” being the best and “5” being the worst.
These include credit risk (loans and others assets turn bad and ceasing to perform), liquidity risk (withdrawals exceed the available funds), and interest rate risk (rising interest rates reduce the value of bonds held by the bank, and force the bank to pay relatively more on its deposits than it receives on its loans) ...
Once those past bad debts are taken care of, you can ask the bank or credit union that provided the negative information to update that item on your ChexSystems report. You still may have to wait five years for the negative information to be completely removed from your report.
Most banks no longer allow others to check or know your bank account balance. However, some banks provide the account balance details when people simply call and request it. For instance, anyone knowing your account information can call the bank to verify the fund on a cheque.
#7: Can Bank Employees Access My Account Without My Permission? Bank employees are typically bound by strict confidentiality and privacy policies that prohibit them from accessing customer accounts without proper authorization.
The Federal Deposit Insurance Corporation (FDIC) has placed 63 lenders on its 'Problem Bank List,' signaling financial, operational, or managerial weaknesses that could lead to insolvency. These banks hold a combined total of $82.1 billion in assets, marking a concerning trend in the financial sector.
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