Analyzing Banking Profiles Essay Example | Topics and Well Written Essays - 500 words

Analyzing Banking Profiles - Essay Example The core capital has also shown similar pattern, which has increased from 7.47% in 2008 to 8.99% in 2010. The capital ratio stands at 11.39% in 2010 when compared to 8% in 2006. The number of institutions reporting to the FDIC has decreased from 8833 institutions in the year 2005 to 7760 institutions in 2010. The number of problem institutions has increased drastically on a year on year basis from 552 in 2009 to 860 in 2010. The number of failed institutions has also increased to 127 institutions in 2010 from just 3 institutions in the year 2007. Possible reasons for the observed changes in the banking industry Bank’s return on assets which refers to net income as a percentage of total assets, increased which suggests that the banking industry is able to garner more interest income with rise in demand for loans with reducing cost of funds, therefore sustaining revenues and improving asset quality. In relation with the core capital ratio, Tier 1 capital can absorb losses withou t a bank being required to cease its functioning. Therefore increase in core capital ratio indicates the health of the banking industry is improving considerably. The banking industry is giving prime importance to strengthen the Tier 1 level of capital.