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Banking & Finance
A N EIGHTH DISTRICT PERSPECTIVE

FALL 1984

Eighth District Banks and the Fed’s Newly
Proposed Bank Capital Standards
In July, the Federal Reserve System asked for comments
on proposed revisions to its capital adequacy guidelines for
state member banks and bank holding companies. The
Federal Deposit Insurance Corporation (FDIC) and the Of­
fice of the Comptroller of the Currency (OCC) recently
issued similar proposals. Although there are differences in
the definitions of primary and secondary capital, the pro­
posals share common minimum percentage standards for
primary and total capital/asset ratios. These minimums are
5.5 percent for the primary capital/asset ratio and 6 per­
cent for the total capital/asset ratio.
The tables on page 2 summarize how Eighth District
banks measure up to the proposed capital standards using
the Fed’s proposed definitions of primary and total capital.

ratios exceed comparable U.S. banks’ ratios by at least onehalf of one percentage point.
Third, there is considerable diversity in the capital ratios
among banks in the Eighth District. For example, the dif­
ferences in capital ratios between banks located in the Eighth
District portions of Kentucky and Tennessee range from
1 to 3 percentage points, depending upon the asset category.

Capital Ratios and Federal Regulatory
Agencies

Table 2 lists Eighth District banks by their respective
federal regulatory agency and shows their average capital
ratios using the Fed’s measures. It also indicates the number
of banks whose capital ratios were less than the Fed’s
Capital Ratios and Total Assets
specified minimums for capital adequacy. The purpose of
this comparison is to determine the number of banks that
Table 1 shows how measured average capital/asset ratios
would be affected if all federal agencies adopt measures
differ across banks in the Eighth District and the nation when
and standards similar to those in the Fed’s proposal.
the banks are divided into four categories by size of assets.
The results indicate that only a small percentage of banks
The information for each of the seven states shown incor­
in the Eighth District and the nation would fail to meet the
porates only those banks located within the geographical
Fed’s standards if they were applied across all banks. On­
boundaries of the Eighth District. Capital ratios were derived
ly 360 of 14,380 banks nationwide had primary capital ratios
from the June 30, 1984, Reports of Condition.
less than 5.5 percent; only 508 banks had total capital ratios
There are three general observations that can be made
below 6 percent. Of the 1,055 Fed-regulated banks nation­
about the data in table 1. First, the capital ratios are in­
wide, 29 had deficient primary capital ratios and 35 had
versely related to the asset sizes of the banks: the smaller
deficient total capital ratios.
the bank, the larger are the capital/asset ratios. This pat­
The table also reveals that there are sizeable differences
tern shows up clearly for the Eighth District and U.S.
among banks’ capital ratios, depending upon the relevant
average capital ratios displayed at the bottom of table 1.
federal regulatory agency. For the United States as a whole,
In the Eighth District, the primary capital ratio declines from
capital ratios at FDIC-regulated (state nonmember) banks
9.1 percent for the smallest asset size category to 6.4 per­
are about 2 percentage points higher than those at Fedcent for the largest; total capital declines
regulated (state member) banks, with OCCsimilarly, from 9.1 percent to 6.6 percent.
regulated (national) bank capital ratios only
The same pattern emerges at the national
slightly above those of Fed-regulated banks.
level.
This ordering is somewhat different for
THE
Second, on average, the larger Eighth
Eighth District banks. Although FDICFEDERAL
RESERVE
District banks have somewhat higher capital
regulated banks have the highest average
RANK of
ratios than similar-size banks throughout the
capital/asset
ratios, OCC-regulated banks
ST. IX)1 IS
rest of the nation. For the two larger asset
have the lowest capital ratios.
size categories, Eighth District banks’ capital
—Courtenay C. Stone and
Michael E. Trebing



Table 1
A verage C a p ita l R a tio s by B ank Total A sset Sizes U sing th e Fed’s Proposed D efin itio n s.
Total Assets
Between $100-$500 Million

Total Assets
Less than $100 Million
Primary
Capital
Ratio

Total
Capital
Ratio

A rka nsa s

9 .6 %

9 .7 %

Illin o is

9 .0

Indiana

Primary
Capital
Ratio

Total
Capital
Ratio

227

8 .1 %

8 .3 %

29

9 .0

277

8 .0

8 .2

17

-

9 .0

9 .0

82

8.1

8.1

13

K e n tu cky

9 .7

9 .8

162

1 0 .0

1 0 .0

M is s is s ip p i

9 .3

9 .3

65

8 .0

M is s o u ri

8 .6

8 .6

367

T ennessee

8 .6

8 .7

E igh th D is tric t

9.1

U nite d S ta te s

9 .2

State or Region

Total Assets
More Than $1 Billion

Total Assets
Between $500 Million-$1 Billion

Number
of
Banks

Primary
Capital
Ratio

Total
Capital
Ratio

2

5 .5 %

6 .1 %

1

-

0

-

-

0

8 .5

8 .5

2

-

-

0

20

1 3 .0

1 3 .0

1

6 .9

7 .0

3

8 .3

9

7 .4

7 .4

2

-

-

0

7 .8

7 .9

50

7 .3

7 .3

1

6 .8

6 .8

3

83

7 .0

7 .2

10

-

-

0

5 .4

5 .9

3

9.1

1 ,2 6 3

8 .2

8 .3

148

8 .0

8 .2

8

6 .4

6 .6

10

9 .2

1 2,061

7 .8

8 .0

1 ,8 6 4

7 .3

7 .7

192

5 .7

6 .0

2 63

Number
of
Banks

Number
of
Banks

Primary
Capital
Ratio

Total
Capital
Ratio

6 .5 %

7 .0 %

Number
of
Banks

S o u rce : J u n e 3 0 , 1 9 8 4 , R e p o rts o f C o n d itio n

Table 2
Average C ap ital R atio s by R e g u la to ry Agency U sing Fed’s Proposed D efin itio n s
Total Capital

Primary Capital
Regulatory
agency
A rkansas

Illin o is

Indiana

K e n tu cky

M is s is s ip p i

M is s o u ri

Tennessee

E igh th D is tric t

U nited States

Ratio

Ratio

Number
of banks
deficient

FDIC

181

9 .4 0 %

3

9 .5 7 %

OCC

74

7 .9 0

2

8 .1 0

3

FED

4

7 .1 9

0

7.91

0

FDIC

170

8 .8 3

0

8 .8 9

0

OCC

104

8 .6 0

1

8 .6 6

1

FED

20

9 .5 5

0

9 .5 8

0

FDIC

58

8 .9 5

1

8 .9 6

1

OCC

31

8 .2 6

0

8 .2 6

3

FED

8

8.91

0

8 .9 3

0

FDIC

147

1 0 .4 5

2

1 0 .5 0

2

OCC

34

7 .6 2

0

7 .7 2

0

FED

5

7 .0 4

0

7 .1 0

0

FDIC

61

8 .2 6

1

8.31

1

OCC

14

8 .9 4

0

9 .0 5

0

FED

1

1 0 .1 5

0

1 0 .1 5

0

FDIC

321

8.41

2

8 .4 5

3

OCC

77

7 .1 2

1

7 .1 5

4

FED

23

8 .6 5

1

8 .6 7

1

FDIC

84

8 .0 7

5

8 .1 5

7

OCC

10

5 .6 6

1

6 .0 5

2

FED

2

7.11

0

7 .6 1

0

FDIC

1 ,0 2 2

8 .9 2

14

8 .9 8

17

OCC

344

7.41

5

7 .5 5

13

FED

63

7 .8 9

1

7 .9 9

1

FDIC

8 ,5 0 9

8 .0 7

167

8 .2 6

246

OCC

4 ,8 1 6

6 .4 0

164

6 .6 4

227

FED

1 ,0 5 5

6 .0 2

29

6 .3 2

35

Source: June 30,1984, Reports of Condition



Number
of banks

Number
of banks
deficient

3

FEDERAL RESERVE BANK OF ST. LOUIS

FALL 1984

EIG H TH D IS T R IC T B A N K IN G D A T A

(dollar amounts In millions)
Small Weekly Reporting Banks1
REGION i
(eastern Missouri and southern Illinois)

Selected Assets
U.S. Treasury and Government Agency
Securities
Other Securities
Federal Funds Sold
Total Loans and Leases-Gross
Secured by Real Estate
Commerical and Industrial
To individuals

Aug 1984

Sept 1984

Oct 1984

Percent Change
Year-to-Date

$ 651
181
119

$ 650
183
137

$ 654
187
136

11.0%
-16.1
-17.1

1,448
641
442
247

1,464
650
448
248

1,480
652
459
249

11.4
11.6
14.2
12.2

2,331

2,360

2,383

4.9

Selected Liabilities

Total Deposits

REGION II
(Arkansas, northern Mississippi, western Tennessee)

Selected Assets
U.S. Treasury and Government Agency
Securities
Other Securities
Federal Funds Sold
Total Loans and Leases-Gross
Secured by Real Estate
Commercial and Industrial
To individuals

Aug 1984

Sept 1984

Oct 1984

Percent Change
Year-to-Date

$ 372
198
23

$ 371
196
38

$ 367
196
35

7 .90/0
-13.7
-41.7

1,364
479
549
248

1,380
495
545
251

1,394
503
529
268

6.8
28.6
-1 .9
21.3

1,886

1,944

1,927

0.7

Selected Liabilities
Total Deposits

REGION ill
(western Kentucky and southern Indiana)

Selected Assets
U.S. Treasury and Government Agency
Securities
Other Securities
Federal Funds Sold
Total Loans and Leases-Gross
Secured by Real Estate
Commercial and Industrial
To individuals

Aug 1984

Sept 1984

Oct 1984

Percent-Change
Year-to-Date

$ 498
227
139

$ 501
226
146

$ 499
226
135

5.7%
-3 .8
-34.8

1,108
414
342
270

1,120
420
335
280

1,138
434
324
283

12.3
10.2
2.5
19.4

1,857

1,879

1,874

1.4

Selected Liabilities
Total Deposits

1A sample of commercial banks with total assets less than $300 million.




3

EIG H TH D IS T R IC T B A N K IN G D A T A

(dollar amounts in millions)
Large Weekly Reporting Banks2
Selected Assets
Total Loans
Secured by Real Estate
To Financial Institutions
Agricultural
Commercial and Industrial
To Individuals
All Others
Total Investments
U.S. Treasury and Government Agency
Securities maturing in:
1 year or less
1 through 5 years
over 5 years
Securities of State and
Political Subdivisions

Percent Change
Year-to-Date

Aug 1984

Sept 1984

Oct 1984

$11,839
2,507
1,111
118
4,514
2,278
1,311
3,045

$11,962
2,513
1,092
123
4,527
2,312
1,395
3,072

$12,025
2,511
1,035
124
4,652
2,346
1,357
3,004

788
581
480

836
567
469

781
588
428

34.9
-36.7
48.6

1,195

1,198

1,206

-2 .7

$14,347
1,745
972
8,948
1,797
3,460

$14,677
1,831
985
9,066
1,886
3,391

$14,794
2,047
1,009
9,269
1,913
3,500

10.0%
11.8
14.6
27.8
12.6
5.6
1.7
-1.1

Selected Liabilities
Total Deposits
Demand Deposits Adjusted3
Other Transaction Balances4
Total Non-transaction balances
MMDAs
Time Deposits of $100,000 or more

Selected Eighth District Interest Rates
Aug 1984
Super NOW Accounts
Money Market Accounts
Time certificates and time
deposits less than $100,000:
92 through 182 days
over 1 year but less than 2 1/2 years
2Vz years and over

7.75%
8.95
10.58
10.84
10.90

Sept 1984
7.63%
8.84
10.45
10.77
10.89

5

Oct 1984
7.46%
8.63
9.85
10.32
10.48

2Large banks are those with total assets greater than $750 million.
3AII demand deposits except those of the U.S. government and commercial banks less cash items in the process of collection.
4lncludes NOW, Super NOW, ATS and accounts permitting telephone or pre-authorized transfers.
5Average interest rates paid on new deposits by a sample of large and small commercial banks.




3.5%
37.2
1.1
11.3
25.4
13.3

Year Ago
Oct 1983
7.31%
8.30
9.05
9.51
9.69


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102