Industry News

Banks see delinquent loans rise 23.8%

FDIC says reserves not keeping pace

Banks and savings institutions are boosting reserves and loan loss provisions at a pace not seen in decades, but the increases aren't keeping up with a sharp rise in delinquent loans -- particularly mortgages -- federal regulators warned in a report today. The Federal Deposit Insurance Corp.'s Quarterly Banking Survey reveals that the 8,560 institutions it insures boosted their reserves by 7 percent during the third quarter, to $87 billion. It was the largest quarterly increase in reserves in 18 years, but failed to keep pace with a "sharp rise" in delinquent loans, the report said. Residential mortgage loans were the focal point of the deterioration in asset quality, said FDIC Chairman Sheila Bair, but delinquency and loss rates were up across all major loan categories. Noncurrent loans were up 23.8 percent from the previous quarter, to $83 billion -- the largest increase in 20 years. More than half the increase was attributed to residential real estate loans. Noncurren...