FDIC: Bank finances showing signs of improvement

8/24/2011

The banking industry has remained sound despite recent economic turmoil, according to the Federal Deposit Insurance Corporation.

Although the stock market has lost ground throughout late July and August and the country is still recovering from the late-2000s recession, the FDIC announced that its list of "problem" banks shrank in the second quarter. This was the first such reduction since 2006 (before the onset of the recession in 2008).

"Banks have continued to make gradual but steady progress in recovering from the financial market turmoil and severe recession that unfolded from 2007 through 2009," said Martin J. Gruenberg, FDIC acting chairman."This trend has expanded to include a growing proportion of insured institutions."

As banks show signs of improvement, businesses may be in store for an easing of commercial lending. With interest rates being held low by the Federal Reserve, a strong financial sector could begin to give businesses the influx of capital needed to spur expansion and job growth.

In addition to less "problem" institutions, the FDIC also noted lower net losses compared to last year. Improvements in aggregate profit were recorded for the majority of banking institutions, with a $7.9 billion increase over the second quarter of 2010.