Prompt Corrective Action
For over a decade, up through 2007, bank failures were few and far between. There were more than enough buyers for even troubled banks. A couple of years ago, I represented a CAMELS-5 rated bank that was sold when the FDIC Division of Resolutions was in the process of putting together bid packages. Even that bank sold for two times book value. Now the environment is different. The market for troubled banks is much more limited. Bailout capital is scarce and regulatory pressure is more extreme. As a result, the number of bank failures in this “crisis” seems to be heading inexorably toward 100. Bankers need to understand what the regulatory ramifications are if the bank begins to experience problems.
