More US banks face survival struggle

May 28th, 2009 - 12:44 am ICT by IANS  

Washington, May 27 (DPA) The number of US banks facing collapse jumped dramatically in the first quarter with a 21 percent increase in “problem” lenders, a US government agency said Wednesday.
The Federal Deposit Insurance Corporation’s head Sheila Bair said the increase - reportedly the worst change in 15 years - showed “the banking industry still faces tremendous challenges”.

The FDIC put 305 banking institutions on its “red list” of endangered firms. During the first quarter, 21 FDIC-insured banks failed, the largest number since the last quarter of 1992, the FDIC said.

From January to late May, a total of 36 banks, many of them regional firms, have been closed down. In all of 2008, the total was 25. The US is in the midst of the worst recession since the 1930s, triggered by the crisis in mortgage lending and foreclosures.

The FDIC, which guarantees bank deposits, said that the firms it insures reported a net income of $7.6 billion in the first quarter, a decline of $11.7 billion, or 61 percent, from the same period in 2008.

“Banks are making good efforts to deal with the challenges they’re facing, but today’s report says that we’re not out of the woods yet,” Bair said. “As I see it, we’re now in the cleanup phase for the banking industry.”

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