The Federal Deposit Insurance Corp. "properly" oversaw $25 billion-asset Colonial Bank in the 14 months leading up to its Aug. 14 failure, the agency's watchdog said this week.

Though most others reviews of the agency's supervision have found fault, the FDIC's inspector general noted the short period the agency had as the Alabama bank's primary overseer after taking over from the Office of the Comptroller of the Currency.

"Based on the supervisory actions taken with respect to Colonial, the FDIC properly implemented applicable" prompt-corrective-action procedures, the inspector general said in its report, which was distributed Wednesday.

"However, by the time Colonial's capital levels fell below the required thresholds necessary to implement PCA, the bank's condition had deteriorated to the point at which the institution could not raise additional capital in the time period necessary to prevent its failure."

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