Recently Chartered Banks' Vulnerability to Real Estate Crisis
FDIC Banking Review Series, Vol. 17, No. 2, 2005
15 Pages Posted: 20 Feb 2006
The FDIC closely monitors recently chartered banks and thrifts. For purposes of offsite monitoring, the FDIC defines young banks as commercial banks and thrifts that are eight years old or younger based on studies showing that new banks need more than three years to fully mature (DeYoung , DeYoung and Hasan ). Newly chartered banks tend to be small, and roughly 80 percent of all young banks are located in metropolitan statistical areas (MSAs). This study examines these young banks. Specifically, it examines the vulnerability of these young banks to real estate problems: how their financial condition evolves over time, the degree of risk they bear because of their real estate lending, how they compare with established banks in this respect, and what explains the heightened vulnerability of young banks to real estate crises.
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