WASHINGTON - With a congressional hearing into recent regulatory failures looming, the Federal Deposit Insurance Corp. on Thursday tried to take a get-tough position on risky banks that pay no insurance premiums.

But the plan, to be laid out in a letter to bank executives early next week, is unlikely to deter House Banking critics who will grill FDIC Chairman Donna A. Tanoue and other top regulators Tuesday about several embarrassing and expensive bank failures.

Until now, well-capitalized institutions with Camels ratings of 1 or 2 have almost automatically been branded 1-A, the top rating in the nine-box matrix the FDIC uses to set deposit insurance premiums. Over 93% of all banks and thrifts fit the description, and they pay nothing.

Under the agency's revised approach, call report data and examiner know-how will be used to cull through these 9,600 institutions and identify "outliers" - outwardly healthy banks that are engaging in risky behavior, such as excessive growth or asset concentration. These institutions could be bumped down to the 1-B category and lose their free ride.

"This is just one more incentive for outliers to address supervisory concerns about how they are managing their risks," said Ms. Tanoue. "It addresses concerns at a few institutions earlier than might otherwise be the case, and helps safeguard the insurance funds and the banking industry from losses down the road."

The plan, under development since 1998, follows four recent spectacular failures, including the First National Bank of Keystone (W.Va.) and BestBank of Boulder, Colo. Regulators were aware of these banks' problems but failed to prevent their costly failures.

In an interview Thursday, FDIC Insurance Director Arthur J. Murton said the FDIC's revised plan could make such failures less likely in the future. "If a bank has supervisory concerns over an extended period and those aren't addressedÂ…the financial penalty is greater, and the supervisory sanctions become increasingly severe," he said.

But in practice, the plan is almost all bark and no bite.

Though statistical "screens" employed by the agency identified several hundred possible "outlier" banks and thrifts, all but six were subsequently cleared, either because their Camels ratings were good or because their examiners said they had strong risk-management procedures in place. The unnamed six will have until June to show improvement, or face higher insurance premiums for the second half of 2000.

Moreover, any bank bumped down to the 1-B category will pay just 3 cents per $100 in insured deposits, compared with the 27 cents per $100 paid by those in the FDIC's worst assessment category. Even if all six banks and thrifts were forced to pay, their assessments would total less than $1 million, Mr. Murton said.

The system also is not designed to detect fraud, a key component in several recent bank failures.

Mr. Murton defended the FDIC's plan, echoing Ms. Tanoue's argument that higher premiums are an incentive to deter risk taking. But he said the FDIC has no plans to raise the rate in the near future. "It's not really about getting money into the fund," he said.

In addition, Mr. Murton said the FDIC will adjust the screens in the future as it learns more about the early-warning signs of bank failures. "One of the things we're trying to do here is make the risk-based premium system more forward looking and keep pace with emerging risks," he said.

The FDIC declined to provide details on the six banks and thrifts, which will be notified of their status within the next two weeks.

To identify outliers, FDIC took the roughly 9,600 1-A banks and thrifts and divided them up into five rough groupings: Commercial lenders, agricultural, mortgage, consumer, and "other small."

Next, they performed a statistical analysis of each institution's two-year growth rate, loan yield, change in business mix, and asset concentration - the plan's four risk categories - as of June 30. If a bank was in the riskiest fifth among its group in two or more categories, it was flagged. The analysis yielded several hundred institutions.

That group was whittled down to 193 by looking at each institution's individual Camels components. Only those institutions with ratings of 3 or higher - ratings range from 1 to 5 - on key components, such as assets or management, were kept on the list of risky institutions.

Finally, the FDIC contacted examiners and asked about the quality of each institution's risk-management procedures. Of the 193 remaining banks and thrifts, 187 were exonerated because their procedures were deemed adequate for the risk involved.

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