Could almost 9 percent of Bay State banks be in danger of failure?
That’s the dire assertion made by the Invictus Consulting Group in its latest “Sustainability Rating National Summary.”
In it, the financial services consulting firm says 8.9 percent of banks in Massachusetts are in such poor financial position that they could fail outright in the next two years. That’s 14 of the state’s 157 banks, and it represents $15 billion, or about 15 percent, of the total bank assets in the state.
Invictus says it uses a proprietary “stress test” to measure the health of banks in each state, but while it does provide the numbers above, it does not provide the names of the banks said to be on the brink.
And local industry folks say there’s reason to be skeptical. After all, only one Massachusetts bank has failed since 2008, during the teeth of the recession.
Jon Skarin, senior vice president of the Massachusetts Bankers Association, said Invictus and other similar firms do not have access to all the information they need to arrive at a truly informed conclusion.
“They’re certainly entitled to look at (the information to which they do have access) but some of it is proprietary (to the bank) and some of it is protected by regulators,” Skarin said. “They can take a snapshot of a call report and make it look as bad or as good as you want.”
Still, warning that 14 Massachusetts banks could fail in the next two years stretches the bounds of credulity, according to Skarin.
“At the height of the crisis, were they predicting 50?” he said. “It doesn’t strike me as accurate, outside of mainstream thinking. Not that it was ever terrible, but Massachusetts didn’t have a lot of problems to begin with, and the industry here in Massachusetts is still very strong. The economy is a drag, but the delinquency data, and the loan loss data that I’ve seen recently has been improving. The FDIC ‘problem banks’ list is going down.”
“There’s a lot of these firms out there,” Skarin said. “They’re out there to sell this stuff. I’m sure they want to sell you all their data.”
