The Federal Deposit Insurance Corporation has been exploring several options for reforming
the risk-based deposit insurance system by more effectively differentiating risk among insured
institutions. Each option involves trade-offs among a number of desirable attributes, since no
one option possesses all of the attributes to the highest degree. This article describes the
options under consideration and examines the trade-offs among them.
As part of its extensive off-site monitoring efforts, the Federal Deposit Insurance Corporation
has evaluated banks’ and thrifts’ vulnerability to a real estate crisis similar to the crisis that
occurred in New England in the early 1990s. This article discusses the resulting Real Estate
Stress Test (REST) and current trends in REST ratings. That model indicates that a very
large number of banks and thrifts in the West and the Southeast are heavily concentrated in
commercial real estate.
The views expressed are those of the authors and do not necessarily reflect official positions of the Federal Deposit Insurance Corporation. Articles may be reprinted or abstracted if the FDIC Banking Review and author(s) are credited. Please provide the FDIC's Division of Insurance and Research with a copy of any publications containing reprinted material.
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Chairman Donald E. Powell
Director, Division of Insurance and Research Arthur J. Murton
Deputy Director Fred Carns
Executive Editor George Hanc
Managing Editors Jack Reidhill, Diane Ellis
Editorial Committee Christine E. Blair, Valentine V. Craig, Rose M. Kushmeider