Question: If my bank has a high troubled asset ratio, what should I do?

Answer: The short answer is “nothing.” The FDIC covers all deposits up to $250,000 and no investor has lost any insured deposits since the FDIC went into business in 1935. The FDIC is backed by the full faith and credit of the United States government.

Question: Are you saying that a bank with a high “troubled asset ratio” is going to fail?

Answer:   No. Each bank must be evaluated separately. In some cases, the owners of banks are able to inject additional capital in order to strengthen the bank. In other cases, individuals and companies are able to bring their loans current and repay them. Additionally, it is possible that a bank facing difficulties will be able to find a strong merger partner. The FDIC says that historically most “troubled banks” eventually recover.

Question: Federal banking officials and banking executives say it is not possible to reduce bank safety to a single number and that any attempt to do so will mislead the public, which already is nervous about the safety of the nation’s banks.

Answer: We agree with that analysis. That’s why we are publishing other key variables. We also publish data comparing results over an extended period of time. And we compare each bank’s troubled asset ratio to the median for all banks.

Question: The FDIC keeps a “troubled bank list.” Are the banks that you show with the highest troubled asset ratios on that list?

Answer: Unfortunately, we can’t answer that question. The FDIC refuses to make its list public.

Question: Given all these caveats, why are you publishing this information?

Answer: Any statistical analysis has its flaws and this one is no exception. However, the FDIC data provides the best public glimpse into the operations of a bank. And it is the duty and responsibility of the news media to help the public understand complex issues. It is also true that the “troubled asset ratio,” has meaning – it identifies the banks that have a large amount of nonperforming loans and it shows the relative risk of those loans to a bank’s capital and reserves (the money it has to cover losses in loans and other assets, such as securities)