Weiss Ratings: Banking Industry Short-Changes Loss Reserves.(Brief Article)

The average loan loss reserve at U.S. banks fell to its lowest level in eight years during the third quarter of last year as a slowing economy and a rising number of bad loans took its toll on the industry, according to Weiss Ratings Inc. here.

As of Sept. 30, 2001, the average loan loss reserve at banks was 129% of nonperforming loans, the bank rating agency said.

Martin Weiss, chairman of Weiss Ratings, said that banks "are still dragging their feet when it comes to adequately recognizing the surge in defaults and bad loans."

"The industry has started to acknowledge the need for higher reserves to cover the losses, but it's too little, too late as the growth in problem loans continues to outpace the growth in reserves."

The nation's 9,701 banks and thrifts set aside a collective $30.2 billion in the first three quarters of 2001 for potential loan losses, 42% more than they set aside in the same ...