A watchdog has issued two additional reports saying regulators should have responded more quickly to institutions' troubles before they failed.
Echoing recent criticism of all the regulators, the reports said the Federal Deposit Insurance Corp. could have been more aggressive in responding to problems at the $1 billion-asset Integrity Bank in Alpharetta, Ga., and the $726 million-asset Columbian Bank and Trust Co. in Topeka, Kan.
The reports, issued late last month by the FDIC's inspector general, blamed the August failures on the institutions' aggressive growth strategies, which focused on risky construction and development loans. But despite FDIC examiners' spotting weakness in their portfolios early on, the watchdog said, the agency was slow to impose supervisory action.
"Greater concern regarding Integrity's loan administration and declining asset quality could have led to elevated supervisory attention and earlier supervisory action," the watchdog said in the report on Integrity Bank's failure, known as a "material loss review."
The inspector general said examiners saw problems with Integrity's asset quality in 2005 and 2006, but did not issue a cease-and-desist order until February 2008. A similar time lapse occurred at Columbian. "Supervisory action was not taken commensurate with the risks these weaknesses posed to" the Kansas bank, the report said.
