One-Quarter of NW Banks Still Problematic, say Rating Agencies
April 19, 2011
April 19, 2011
One-quarter of Northwest banks are still considered problematic, according to a survey of ratings agency data by the Northwest Credit Union Association (NWCUA).
The Association compared ratings from Bauer Financial and Highline Financial, a division of Thompson Reuters, and found that nearly 30 percent of Washington-based banks and 22 percent of Oregon-based banks are considered problematic or troubled.
These rates, which take into account capital levels, asset quality, earnings ratios and liquidity, were based on data released by federal regulators.
By contrast over 90 percent of credit unions in Oregon and Washington are considered strong or adequately capitalized, according to Bauer and Highline.
“These numbers show banks in the region are still struggling to recover from their past mistakes,” said NWCUA CEO John Annaloro. “While their financial position is better than it was a few years ago because of mergers and liquidations, credit unions are clearly the much healthy sector.”
According to Highline Financial’s data, there are more than $19.5 billion in assets at troubled Washington banks, and the average troubled Washington bank controls about $820 million in assets. The corresponding numbers for Oregon banks are $4 billion and $575 million, respectively. More than 40 percent of troubled Washington banks have over $300 million in assets. Two of the seven troubled banks in Oregon had over $1 billion in assets.
Banks that fall into the problematic category will be under much greater regulatory attention with a focus on resolving losses and improve the capital base. If not fixed, a bank will be forced to close or merge through a purchase & assumption agreement, whereby a healthy institution purchases assets and assumes liabilities from an unhealthy bank.
Regulators are still working to reel in the worst banking practices and solve the problem of failing banks. The FDIC is scheduled to publish a report showing how it would use new powers to wind down a company that is important for the financial system, according to the Financial Times.
There is also continued public pressure by newspapers and politicians. A report by the U.S. Senate permanent subcommittee on investigations found there was “a variety of troubling and sometimes abusive practices” by banks, while a recent article in the New York Times queried “[why,] in the aftermath of a financial mess that generated hundreds of billions in losses, have no high-profile participants in the disaster been prosecuted?”
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Posted in Economy.