Monday, December 11

Banks Got Strapped Ask For Help

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Monday letter to Federal Deposit Insurance Corp. Chairman Sheila Bair and Federal Reserve Chairman Ben Bernanke, Florida’s top banking lobbyist requested all local banks be granted a 12-month break from higher capital requirements, loan appraisals and new regulatory sanctions.

“Unless we work together in giving our banks more time to work through this oil crisis,” more financial institutions will go under, wrote Florida Bankers Association President Alex Sanchez. “A bank can only be as good as the community it serves.”

The FDIC and the Federal Reserve declined to comment. Regulators are working on a joint policy statement that will address some of the questions posed by the Florida bankers, according to people familiar with the matter.

Following Hurricane Katrina in 2005, regulators granted banks in Louisiana, Alabama, Mississippi and Texas a three-year waiver from loan-appraisal regulations but didn’t offer a full exemption from capital requirements. “The bank regulators have a long history of working with banks affected by natural disasters,” said Kevin Mukri, a spokesman for the Office of the Comptroller of the Currency.

Thirty Florida banks already have failed since 2007, the third-highest total among U.S. states, after Georgia and Illinois. The banks are suffering further because the spill has caused construction delays and chased tourists from the region, potentially leading to losses on real-estate loans the banks made on hotels, strip malls and the like.

The spill “is going to be a source of additional stress in Florida for banks that are already under significant duress,” said University of Central Florida economist Sean Snaith.

All told, the BP spill could sap as much as $10.5 billion in spending and as many as 195,000 jobs from the state’s economy, according to a recent study from Mr. Snaith. That worst-case-scenario is based on a 50% drop in tourism spending in the counties along the state’s Gulf Coast. That region attracts $12.4 billion annually in tourism revenue, which helps employ 269,000 people.

One institution attributing its recent fund-raising problems to the spill is Florida First City Banks Inc. The five-branch Fort Walton Beach, Fla.-based lender is operating under a regulatory order requiring it to put together a new capital plan. But the bank suspended its efforts to raise at least $3 million after the spill spooked potential investors, according to First City Chief Executive John McGee.

Fund raising came to a “screeching halt,” said Community Capital Advisors Inc. President Shaun Dalton, hired to help First City find new capital. Investors pulled about $500,000 in prior commitments, he added.

Potential funders said “they didn’t know how the long oil spill would last or when BP would plug the hole or what the long-term effect would be,” added Mr. McGee.

Despite the problems in Florida, regulators aren’t likely to issue a “blanket waiving” of new capital-raising requirements, according to banking consultant Bert Ely. But “it’s a tough judgment call,” he said. “If there are banks really crippled by this, it’s a serious public-policy question as to whether they should stay open.”

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