Stress Results Show Banks Struggling

The average bank in Q109 experienced stress levels five times those seen in the mid-’90s, according to the quarterly IRA Bank Monitor, released today. The quarter’s data indicates the average bank’s stress index moved from a stress index of 1.8 at the end of Q408 to 5.6 coming out of Q109, Institutional Risk Analytics (IRA) reported. An index of 1.0 indicates the average December 1995 stress level. IRA suggested the sheer volume of banks posting first-quarter losses swung the overall geography of banks studied into red ink territory. So far, 1,575 banks posted losses in Q109, based on call reports tracked by IRA. Many of these institutions suffered losses related to mark-to-market accounting, goodwill write-downs and other return on equity (ROE) issues. “The numbers indicate we need to seriously ask the question as to whether economic recovery for the United States can still come from repairing Wall Street — or whether instead we should be worried about addressing the underlying loss rates that are driving the provisioning behind these poor ROE results,” IRA analysts said in the preliminary results statement. Write to Diana Golobay.

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