FDIC boss says banks healthier

FDIC boss says banks healthier

February 25th, 2011 by Mike Pare in Business Around the Region

Federal Deposit Insurance Corporation (FDIC) Chair Sheila Bair. (AP Photo/Haraz N. Ghanbari, file)

While the number of at-risk banks late last year was at the highest level in 18 years, banks are getting healthier, the Federal Deposit Insurance Corp.'s chairwoman said here Thursday.

"Bank failures will be a lot lower this year," said FDIC chief Sheila Bair.

She said while troubled banks are at elevated levels, the trend is improving.

"Things are getting better," Bair said after addressing a Chattanooga Women's Leadership Institute meeting. "The situation is improving."

The report released this week by the FDIC showed that the number of banks at risk of failing made up nearly 12 percent of all federally insured banks in 2010's fourth quarter.

Also, while the FDIC reported the industry's highest earnings as a group since the financial crisis struck three years ago, it said only a small fraction, the nation's largest banks, are driving the bulk of earnings growth. Many of those same banks have recovered with help from federal bailout money.

Bair said smaller banks are getting better as well, though they are lagging bigger institutions.

She said the FDIC pushed hard in the recently passed financial reforms to "make sure we had tools to resolve [problems with] large financial institutions as [well as] small institutions. It should be the same process -- large or small."

Bair also said that community banks will survive in the new financial environment.

"We're very determined on that score," she said. "I do strongly feel it's in the public's interest to have diversity and choices of their banking relationship, and a lot of people want to do business with community banks. It's our obligation to make sure that sector is vibrant and competitive."

Bair, who took her post in 2006, plans to leave this summer.

U.S. Sen. Bob Corker, R-Tenn., said in videotaped remarks that he has dealt with many "financial titans" during his tenure and called Bair "a strong leader."

"I've got her cell phone number, and on many occasions I've called her for advice," he said.