Wee progress

23 February 2011 By Rob Cox Follow @rob1cox

The biggest U.S. banking institutions are still benefiting from the perception that the government will always come to their rescue. But a slight narrowing in the gap between what megabanks and others in the industry pay for deposits may suggest a hint of progress.

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The Federal Deposit Insurance Corp on Feb. 23 reported that the 107 U.S. banks with more than $10 billion held onto their whopping 78 percent share of the industry's assets and earned seven times more on them than smaller banks.

And these massive firms, including the dozens that availed themselves of tens of billions of dollars of lowcost funds from the Treasury's Troubled Asset Relief Program during the financial crisis, paid just 77 basis points in annual interest to depositors in the fourth quarter. That's the lowest rate in the statistics published by the FDIC, which stretch back to the first quarter of 1984. Smaller banks, on average, had to pay customers around 1.18 percent.

The FDIC, which guarantees the deposits of U.S. bank customers, said its list of problem banks rose to 884 institutions with $390 billion of assets, up from 860 in the previous quarter with $379 billion of assets.

FDIC press release

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