For 1st time since ’06, bank insurer hopes to end year with 0 failures; CU insurer hopes for status quo

With less than two weeks left in the year, officials at the federal insurer of deposits in banks are keeping their fingers crossed that a “zero sum” will continue undisturbed.

Meanwhile, over at the federal credit union regulator (which also insures savings in the cooperative financial institutions), officials likewise have crossed digits, hoping their sum stays the same, too.

In the case of the Federal Deposit Insurance Corp.’s (FDIC), the agency is hoping that the string of no bank failures in 2018 lasts through the final 13 days of the year.

In the case of the National Credit Union Administration (NCUA), the agency is hoping that the number of credit union failures doesn’t increase any further – especially since 2018 was the first year out of the last three in which total failures throughout the year grew over the previous year. But it will also be the third time in the last nine years that credit union failures have risen over the previous year.

On Tuesday, during the FDIC Board meeting in Washington, agency Deputy to the Chairman and Chief Financial Officer Steven O. App told the board that so far, “no insured financial institutions have failed in 2018.” If that zero total holds for the year, it will be the first year since 2006 – the first year before the financial crisis began to ramp up – that there have been no FDIC-insured financial institution failures in a single year.

Board Chairman Jelena McWillliams, after hearing App’s comment, good naturedly urged him “not to jinx” the no-failure streak by talking about it too much.

However, she may have good reason to be superstitious: The last time the FDIC reported no insured-institution failures was in 2006 – the year before the financial crisis began to ramp up. Within three years, the agency reported 145 failures – and 154 the following year, the peak of failures during the financial crisis.

Over the period 2007-14, the FDIC counted 507 failures, according to numbers posted on fdic.gov.

The good news for the FDIC is that failures declined in each year from 2011 to last year (when the agency reported eight failures, three more than the previous year). For this year, so far, it’s been a blackout on the failure front for the FDIC.

For the credit union regulator and insurer (via the National Credit Union Share Insurance Fund), the results have been more mixed. While NCUA recorded fewer failures overall between 2011-14 (52), it has recorded at least five failures each year since 2009.

So far in 2018, there have been seven failures of federally insured credit unions, two more than in 2017. However, that failure rate is well below the average of 12.4 failures per year since 2009, according to NCUA statistics – and well below the high over that period of 19 recorded in 2010. (During the period 2009-14, NCUA reported 86 credit union failures.

 

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