U.S. big bank failure remote: FDIC chief

By John Poirier

WASHINGTON (Reuters) - Chances of a big bank failure are remote but regulators are hoping for the best and preparing for the worst to deal with a strong industry hit hard by credit problems, a top U.S. regulator said on Tuesday.

Sheila Bair, chairman of the Federal Deposit Insurance Corp, said bank failures will likely tick up but mainly among smaller institutions.

When asked what keeps her up at night, Bair, speaking at the Reuters Regulation Summit in Washington, said: "Probably a large bank failure but I don't think that's going to happen. The chances of that happening are very, very remote."

The FDIC, which insures up to $100,000 per depositor per insured bank and up to $250,000 in some retirement accounts at banks, has a $52 billion purse it can dip into for bank failures.

"I really don't think it's going to happen, I would hasten to add," she said.

The Bush administration cited in its 2009 budget proposal "a higher rate of potential failures given current conditions in the industry" and said the agency expects to collect about $4.7 billion in new revenue from premiums that banks will pay in 2008 and 2009.

An analyst with RBC Capital Markets said last week that between 50 and 150 U.S. banks could fail by early 2010, mostly those with no more than a couple of billion dollars of assets.

Bair said she could not speculate about future predictions and repeated previous statements indicating that banks overall are in strong shape and the size of the problematic ones are small.  Continued...