The Evolving Landscape of Distressed Bank Restructurings

Over the past decade, the landscape for struggling distressed financial institutions has evolved, but has not changed dramatically. To put it in perspective, in 2005-2006, there were essentially no bank failures. At its peak, however, as the economic crisis matured in 2010, there were 157 bank failures. That same year, the FDIC's confidential “problem” institution list (which identifies banks that demonstrate weaknesses that threaten their financial viability) mirrored the rise in bank failures, and spiked at 884 financial institutions. Since 2010, the number of actual bank failures has declined from the high of 157 in 2010 to 92 in 2011 and 51 in 2012. However, in 2013, the FDIC's “watch list” of troubled lending institutions remains at a historic level, at nearly 700 (or 10% of the country's 7181 chartered banks) ' extraordinary when compared with the prior decade when the list never rose to more than 150 troubled institutions attracting the FDIC's attention. Although actual failures appear to have declined, the FDIC's list of nearly 700 “problem” banks reveals that the problem of inadequate bank capitalization and the need for restructuring remains strong.