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FDIC's Bair: Bank lending slowly opening up

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Federal Deposit Insurance Corp. Chairman Sheila Bair said banks should look toward more lending even though financing via the securitization market is "not there anymore." Bair spoke briefly Tuesday morning during a segment on CNBC's "Squawk on the Street," program. "We want banks to lend to credit-worthy borrowers," Bair said. As the economy improves, Bair said she expects borrowers to commit to new business expansion and banks to be more willing to make loans. "Almost all indicators are for an improved banking sector," she added. Bank closings peaked in 2010 at 157, up from 140 in 2009. Despite 25 closings already this year, Bair sees improvement on the horizon with significantly less bank failures expected this year. Prudent lending, she said, will improve bank's earnings statements. "We are seeing a lot of improvement," Bair said, "credit quality is improving." The FDIC's deposit insurance fund, meanwhile, is continuing to improve, she noted. Under the Dodd-Frank Act, the FDIC is required to set the designated reserve ratio at 2%. The rule took effect in January. Dodd-Frank gave the FDIC greater discretion to manage the DIF, including where to set the DRR. The financial reform law raises the minimum DRR, which the FDIC is required to set each year, to 1.35% from the former minimum of 1.15%. The FDIC has until Sept. 30, 2020, to get the fund reserve ratio up to 1.35%. Write to Kerry Curry. Follow her on Twitter @communicatorKLC.

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