WASHINGTON – As reported earlier in Credit Union Journal, NCUA has indicated many credit unions will see a downgrade in their CAMEL ratings this year due to a combination of economic factors and the agency’s own tougher standards. Now the FDIC, which insures the nation’s banks, indicated it, too, is pushing other agencies to more forcefully downgrade the confidential rating – which is known only to regulators and bank management – of troubled financial institutions, according to people familiar with the talks.
The plan originally was reported by American Banker, an affiliate of Credit Union Journal.
According to the report, should the FDIC get its way, it could result in more public enforcement actions and could give the FDIC more muscle to either force companies to improve their balance sheets or seek a sale. It also could make it more expensive for companies to raise capital, as scrutiny from investors would likely spike, American Banker reported, adding that the FDIC's push is being met with resistance from regulators with primary responsibility for these institutions.
For example, the Office of Thrift Supervision, a division of the Treasury Department that supervises more than 800 savings-and-loan institutions, largely focused on mortgage lending, has resisted the FDIC, arguing for a less-dire analysis, people familiar with the matter said. FDIC officials have tried to encourage other regulators, such as the Office of the Comptroller of the Currency, to downgrade more of the banks it supervises.
Regulators are struggling with one of the worst credit markets in decades amid questions about the adequacy of their existing patchwork of supervision. Only eight federally regulated banks or thrifts have failed this year, but more than 100 others are on the government's watch list. Many banks are struggling to raise capital and observers expect the frequency of failures to grow.
