Problem Banks on the Rise

The number of American banks teetering on the edge of collapse is the highest it has been since 1993, a sign that the banking industry has yet to fully recover from the financial crisis. The FDIC’s deposit-insurance fund is deep in the red—minus $20.9 billion at the end of last year, when 702 banks were on its “problem” list, meaning the fund likely won’t recover soon. "The growth in the numbers and assets of institutions on our 'Problem List' points to a likely rise in the number of failures,” FDIC Chairwoman Sheila Bair said. The problem banks have assets totaling $402.8 billion, and there were just 252 on that list a year earlier and 552 in September. And there are other bad signs: For the 12th consecutive quarter, loan losses rose for banks, while total loan balances declined. But there are a few reasons for guarded optimism: Banks reported a small profit ($914 million) in the fourth quarter, compared to record losses ($37.8 billion) a year earlier.