The FDIC likely will take action this week to lower the requirements for private investors to buy failed banks. Reports are that the FDIC will relax the capital requirements for private investors and ease requirements that the buyers "backstop" the banks they acquire.
The FDIC's anticipated actions are a move to expand the field of potential buyers for failed banks, needed in order to stem the rapid depletion of the agency's deposit insurance fund caused by the recent flood of bank failures. At 81 failures so far in 2009 (compared to a total of 25 in 2008), banks are failing at the fastest pace since 1992. With few buyers coming forward, the failures have cost the FDIC's fund over $21 billion so far this year. As of March 31 (the last month for which numbers are available) the fund had fallen to just $13 billion -- down from nearly $53 billion twelve months earlier. Eric Dash of the New York Times has noted that "it is critically important to keep the insurance fund full because confidence in the banking system depends in part on depositors knowing they will get their money back."
The agency's Board of Directors is scheduled to meet Wednesday, August 26, in open session to consider this and other issues.
The FDIC's website states that the FDIC "is an independent agency created by the Congress to maintain stability and public confidence in the nation's financial system by: insuring deposits, examining and supervising financial institutions for safety and soundness and consumer protection, and managing receiverships" when banks fail.
