Friday, March 4, 2011
Crickets...
There were no new failures this week. If there is anything else our readers would like to ask or see reported, we welcome you to comment.
Monday, February 28, 2011
Why the Delay in Closing Banks?
A few weeks ago someone commented about whether or not there would be more closing that day. For some reason, there have been some problems replying to comments. But it did suggest an interesting article topic: Why are the closings so spread out during the day and weeks?
The FDIC has an interesting video about the resolution process. While banks typically report new information to their regulators within a few weeks after the quarter closes, it takes some time for the latter to recognize and act on troubled bank. Once they do, the banks are usually given time to take "prompt corrective action" (PCA). This can take up to another banking quarter. Not all PCAs necessarily result in closings if the banks comply and a number of closings come at the direction of state or other primary regulators. So there may not be a PCA at all. Also, there is generally a lag between the announcement and when it is made public. This last from a few days or weeks for the Federal Reserve Bank and OCC to end of the month after the enforcement for the FDIC.
So we end up with a number of banks failing well after the predictions are made or, in some cases, not at all. This seems to be most pronounced right now for those several banks held by the same holding company Capital Bancorp Limited (CBC).
Regulators also try to close banks when the disruption can be minimized. This is why banks are closed on Friday evenings, usually after 5 pm. With the varying time zones and delays in reporting, the list may change for several hours or, in one case, on Saturday.
The FDIC has an interesting video about the resolution process. While banks typically report new information to their regulators within a few weeks after the quarter closes, it takes some time for the latter to recognize and act on troubled bank. Once they do, the banks are usually given time to take "prompt corrective action" (PCA). This can take up to another banking quarter. Not all PCAs necessarily result in closings if the banks comply and a number of closings come at the direction of state or other primary regulators. So there may not be a PCA at all. Also, there is generally a lag between the announcement and when it is made public. This last from a few days or weeks for the Federal Reserve Bank and OCC to end of the month after the enforcement for the FDIC.
So we end up with a number of banks failing well after the predictions are made or, in some cases, not at all. This seems to be most pronounced right now for those several banks held by the same holding company Capital Bancorp Limited (CBC).
Regulators also try to close banks when the disruption can be minimized. This is why banks are closed on Friday evenings, usually after 5 pm. With the varying time zones and delays in reporting, the list may change for several hours or, in one case, on Saturday.
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