The majority of banks tightened underwriting standards for commercial and retail loans in the past year, following four straight years of easing underwriting standards, according to the Survey of Credit Underwriting Practices, 2008, published by the Office of the Comptroller of the Currency. Examiners also reported increased risk in both categories of loans in the past year, and they expect the consequences of past relaxed standards, combined with general economic weakness, to contribute to increased risk and losses over the next year.

The survey assessed the underwriting standards of 62 banks that had loans totaling $3.7 trillion, which is approximately 83% of total loans in the national banking system.

Overall, 52% of institutions tightened underwriting standards for commercial products for the 12-month period ending March 31, 2008. Only 6% of institutions eased standards, and 42% left them unchanged. In 2005, 2006 and 2007, respectively, only 12%, 6% and 16% of institutions tightened standards, while 34%, 31% and 26% eased. In the past year in the retail sector, which includes home mortgages, home equity loans and credit card portfolios, 68% of lenders tightened underwriting standards, 32% left standards unchanged and none eased. This was also a sharp reversal from the previous three years, in which only 10%, 7% and 13% of institutions, respectively, tightened standards.

The complete OCC survey is available at

The FDIC Deposit Insurance Fund balance grew 1% to $52.843 billion in the first quarter of 2008, according to the CFO Report to the Board. The fund’s earnings in coming quarters, however, are likely to come under pressure as it accounts for the collapse of IndyMac Bank. The FDIC became receiver of the $32 billion institution in July and estimates the collapse could cost the DIF as much as $8 billion to cover losses on insured deposits.

The CFO Report said the DIF earned $430 million in the first quarter, a 26% decline from the year-ago period. Two bank failures in the quarter had only a “nominal” effect on comprehensive income.

The fund’s provision for losses in the quarter was $525 million. This consisted of $458 million in estimated losses for future failures and a $67 million upward adjustment to estimated losses from prior-year failures.

The complete report is available at

To mark the 75th anniversary of the establishment of the FDIC, Chairman Sheila Bair is heading the agency’s Face Your Finances road show. Bair met with community leaders in Chicago and San Francisco in July and plans stops in Dallas and Kansas City, Mo., in September.

The discussions address topics including deposit insurance, what it means to be an FDIC-insured institution, the costs and benefits of banking services, and consumer protections resulting from federal regulation of the banking industry. Panel discussions will also address bank services as they relate to building assets and accessing mainstream credit services, including mortgage loans. The discussions are intended to gather information that can be used in financial literacy initiatives and information materials.

The Face Your Finances tour will visit Dallas on Sept. 10 and Kansas City on Sept. 11. More information is available at



©2008 AICPA


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