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WASHINGTON — Federal banking officials worried about rising bank failures will require new banks to meet stricter regulatory standards for seven years rather than the previous three-year requirement.
The new rules, outlined in a letter Friday from the U.S. Federal Deposit Insurance Corp., require state nonmember institutions insured for seven years or less to meet higher capital requirements and undergo more frequent examinations than older banks.
Also, material changes in business plans for newly insured banks will require FDIC approval during the first seven years of operation, rather than three.
The FDIC said the rules are a response to the higher risk that many newer banks post to its insurance fund, which fell 20 percent in the second quarter to its lowest point since the height of the savings-and-loan crisis in 1992. More than 80 banks have failed so far this year, with more expected.
The FDIC said banks insured less than seven years are over-represented among institutions failing last year and this year, with many failures occurring during banks' fourth through seventh years of operation.
