Remarks Prepared
For
Delivery by FDIC
Chairman Don Powell
National Bankers Association 77th Annual Convention
Nashville, Tennessee
FOR IMMEDIATE RELEASE Media Contact:
PR-104-2004 (10-6-2004) Sally Kearney (202) 898-8675
Good morning. I'm very happy to be here today. It's great to see so many friends and
familiar faces. I want to thank you for this opportunity to continue our dialogue—a
dialogue that has been very beneficial to me over the years.
It's terrific to be here in Nashville—and on such a great fall day. I always find this time of
year to be energizing. Everyone is gearing up—kids are back in school, college
students are hitting the books, parents are chauffeuring their children here and there.
For families, it's a perfect time to focus on priorities.
For bankers like you and for regulators like me—it's a great time to get serious and
discuss those issues that matter to the future of the industry.
I want to focus on three areas this morning. First, the overall health and economic
success of the financial services industry. Second, the important issue of consumer
access to credit. And third, the equally important issue of consumer protection.
First, let's look at the industry. I have spent the greater part of my life in banking—and I
have to say that I have never seen the industry in better shape than it is today. For
those of you who survived the near-death experience of the late 1980s and the early
1990s, as I did, the period we've lived in for the past decade is nothing short of a golden
age of banking.
Just about everywhere you look—from profits to credit quality to the small number of
failures—the news is good. Even in the past few years, the industry's performance and
overall health has been incredibly strong.
Let's look at one of those good news items: capital levels and asset growth. Equity
capital rose from 8.72 percent of assets in June 2001 to 9.50 percent at the end of June
2004. In fact, the average equity-to-assets ratio is at the highest level in more than two
decades. The banking industry is showing continued strength and remains well
positioned for future growth. For example, in mid-2001, deposits at FDIC-insured
institutions totaled $7.6 trillion in assets—now these institutions hold $9.6 trillion in
assets.
For
Delivery by FDIC
Chairman Don Powell
National Bankers Association 77th Annual Convention
Nashville, Tennessee
FOR IMMEDIATE RELEASE Media Contact:
PR-104-2004 (10-6-2004) Sally Kearney (202) 898-8675
Good morning. I'm very happy to be here today. It's great to see so many friends and
familiar faces. I want to thank you for this opportunity to continue our dialogue—a
dialogue that has been very beneficial to me over the years.
It's terrific to be here in Nashville—and on such a great fall day. I always find this time of
year to be energizing. Everyone is gearing up—kids are back in school, college
students are hitting the books, parents are chauffeuring their children here and there.
For families, it's a perfect time to focus on priorities.
For bankers like you and for regulators like me—it's a great time to get serious and
discuss those issues that matter to the future of the industry.
I want to focus on three areas this morning. First, the overall health and economic
success of the financial services industry. Second, the important issue of consumer
access to credit. And third, the equally important issue of consumer protection.
First, let's look at the industry. I have spent the greater part of my life in banking—and I
have to say that I have never seen the industry in better shape than it is today. For
those of you who survived the near-death experience of the late 1980s and the early
1990s, as I did, the period we've lived in for the past decade is nothing short of a golden
age of banking.
Just about everywhere you look—from profits to credit quality to the small number of
failures—the news is good. Even in the past few years, the industry's performance and
overall health has been incredibly strong.
Let's look at one of those good news items: capital levels and asset growth. Equity
capital rose from 8.72 percent of assets in June 2001 to 9.50 percent at the end of June
2004. In fact, the average equity-to-assets ratio is at the highest level in more than two
decades. The banking industry is showing continued strength and remains well
positioned for future growth. For example, in mid-2001, deposits at FDIC-insured
institutions totaled $7.6 trillion in assets—now these institutions hold $9.6 trillion in
assets.
Another good news item is the FDIC insurance funds. In mid 2001, those funds were at
just $42.5 billion—now they are at $46.5 billion. Both insurance funds exceed the target
reserve ratio of 1.25 percent. The Bank Insurance Fund is at 1.31 percent, and the
Savings Association Insurance Fund is at 1.34 percent.
Credit quality is also excellent. Although the noncurrent loan rate increased during the
recession, it is now at 0.89 percent, a 20-year low. Net chargeoffs have gone from .72
percent to .58 percent during the last three years.
New bank charters continue to be part of the picture. The industry continues to
consolidate, having gone from 9,702 insured institutions in September of 2001 to 9,079
at the end of last June. Still, even amidst this consolidation trend, 343 new institutions
have been created. This underscores the continuing dynamic nature of the industry.
Profitability remains strong. The return on assets for the industry is now 1.31 percent,
compared to 1.18 percent three years ago. Amazingly, the industry has set records for
profitability in eight of the past 13 quarters.
Failures remain few and far between. In spite of a patch of economic weakness from
2001 to 2004, we have seen only 20 closing or assistance transactions during that time.
Problem institutions rose after the recession from 102 in mid 2001 to 146 in the third
quarter of 2002. Now, however, this group's numbers are again at 102. Assets of
problem institutions today are half of what they were in 2002—down to $25.9 billion
from $51.7 billion.
The industry pulled through the recession with surprising strength. Bank performance
held up well in spite of economic weakness. Even though commercial and industrial
loan volumes suffered declines after the recession, these loans rose by $17 billion in the
second quarter of this year. The quarterly net charge-offs on C&I loans declined from a
peak of $6.1 billion for the fourth quarter of 2001 to just $1.4 billion in the second
quarter of 2004.
That's not all the good news. Since mid 2001, the number of minority-owned banks and
thrifts has increased from 150 institutions with combined assets of $46 billion to 171
institutions with total assets of $122 billion. During that time, the number of deposit
accounts in FDIC-insured institutions increased by 5.7 million accounts (1.4 percent).
Also, the amount of loans to small businesses and farms has grown by more than 12
percent (or $69 billion), while the number of loans to small businesses and farms has
increased by almost 17 percent (or 2.7 million loans).
Taken together, all of these indicators add up to a very favorable picture of the banking
industry going forward. We are extremely fortunate to have reached this juncture. The
industry's strength today, if carefully tended, will provide the foundation for future
innovation and growth.
just $42.5 billion—now they are at $46.5 billion. Both insurance funds exceed the target
reserve ratio of 1.25 percent. The Bank Insurance Fund is at 1.31 percent, and the
Savings Association Insurance Fund is at 1.34 percent.
Credit quality is also excellent. Although the noncurrent loan rate increased during the
recession, it is now at 0.89 percent, a 20-year low. Net chargeoffs have gone from .72
percent to .58 percent during the last three years.
New bank charters continue to be part of the picture. The industry continues to
consolidate, having gone from 9,702 insured institutions in September of 2001 to 9,079
at the end of last June. Still, even amidst this consolidation trend, 343 new institutions
have been created. This underscores the continuing dynamic nature of the industry.
Profitability remains strong. The return on assets for the industry is now 1.31 percent,
compared to 1.18 percent three years ago. Amazingly, the industry has set records for
profitability in eight of the past 13 quarters.
Failures remain few and far between. In spite of a patch of economic weakness from
2001 to 2004, we have seen only 20 closing or assistance transactions during that time.
Problem institutions rose after the recession from 102 in mid 2001 to 146 in the third
quarter of 2002. Now, however, this group's numbers are again at 102. Assets of
problem institutions today are half of what they were in 2002—down to $25.9 billion
from $51.7 billion.
The industry pulled through the recession with surprising strength. Bank performance
held up well in spite of economic weakness. Even though commercial and industrial
loan volumes suffered declines after the recession, these loans rose by $17 billion in the
second quarter of this year. The quarterly net charge-offs on C&I loans declined from a
peak of $6.1 billion for the fourth quarter of 2001 to just $1.4 billion in the second
quarter of 2004.
That's not all the good news. Since mid 2001, the number of minority-owned banks and
thrifts has increased from 150 institutions with combined assets of $46 billion to 171
institutions with total assets of $122 billion. During that time, the number of deposit
accounts in FDIC-insured institutions increased by 5.7 million accounts (1.4 percent).
Also, the amount of loans to small businesses and farms has grown by more than 12
percent (or $69 billion), while the number of loans to small businesses and farms has
increased by almost 17 percent (or 2.7 million loans).
Taken together, all of these indicators add up to a very favorable picture of the banking
industry going forward. We are extremely fortunate to have reached this juncture. The
industry's strength today, if carefully tended, will provide the foundation for future
innovation and growth.