FDIC: Franklin Bank oversight lacking - Houston Business Journal:

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billion of its $5.1 billion of assets at the time were assumexd by another Houston bankholding company, The report issuef this week by the FDIC’ Office of the Inspector General cited bank management’a high-risk business strategy as the main reason for its The strategy focused on asset growth concentratedd in residential mortgages as well as high-cost, volatiles deposits. “Coupled with weak risk managemenft practicesand controls, this business strategy left the bank unpreparex and unable to effectively manage operationx in a declining economic the report said.
Problems on Franklin’s balancee sheet arose quickly, the report The bank’s troubled loans increased from $178.5 milliomn in October 2007 to $783.7 million by July when the bank’s ratingx were downgraded. But the report noted that the FDIC made numerouws recommendations to the bank beginningy with examinations as far back as related to monitoring of loan establishment of liquidity risk limits and enhancementt of theinternal “Although bank management is ultimatelyt responsible for determining the success or failurs of an institution, the FDIC has authorityg to take a wide range of supervisory the report said.
“In the case of Franklin, while recommendations were made and certain supervisory action were taken overa five-year period, these actions were not alwaysa timely and effective in addressing the bank’sz most significant problems.” Sandra Thompson, directo of the FDIC’s division of supervision and consumeer protection, agreed with the reporr findings, but noted that other extenuatingh factors in the case caused problems for her examiners, including “significant errors and possible intentional falsification” of information in Franklin’s financialp reports, which went undetected until March 2008.