Colorado Banks Remain Strong Despite Foreclosure Winds

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Colorado banks remain strong despite foreclosure winds. Banks should have a strong regulatory system and must exercise discretion while giving out loans. This is a lesson that can be learnt from Colorado banks. In fact, the good news is that banks in the region are doing well.

The banking system has become stronger than before. The banks have also expanded its lending by 11.7 per cent in 2008. This increase has happened despite the not-so-good economic environment. After all, the demand for loans is far less now and the borrowers’ credit worthiness has weakened.

However, a majority of banks anticipate that there will be loan growth in 2009. This confidence stems from strong liquidity, steady reserves of the banking system. It is expected that the customer will borrow. A recent survey has pointed out that 97 per cent of the state’s banks have strong financial reserves.

Despite the recession, when financial institutions have crumbled by the wayside, banks in Colorado have remained safe. The reason is that the banks a have a strong regulatory system unlike Wall Street’s financial firms.

Insurance companies, brokerage houses, mutual funds, hedge funds are often inappropriately described as “banks” when they are not really so. Banks that can be banked upon are regulated. Federal regulators inspect their lending practices whereas non-banking entities are not scrutinized to protect customers’ deposits.

Banks also have to pay Federal Deposit Insurance Corporation insurance premium that protects customers. No customer has ever lost money on FDIC-insured bonds as FDIC has the backing of the US government.

In 2006, the banks were responsible for doling out 58 per cent mortgage loans. Also 18 per cent of foreclosures were handled by them. In comparison, non-banking entities handled 42 percent of mortgages. They were also responsible for tackling 82 percent foreclosures. Surprising it may seem but this is a consequence of irresponsible lending practiced by non-bank financial institutions. There is no “credit freeze” here and these banks are providing credit like before. In recent times, these banks have provided 30 per cent loans in the US while the non-banking firms have provided the rest. It is impossible for the Colorado banks to immediately fill up the gap since they are still following the strict standards.

Still they are working to meet the needs of US economy. The outlook as of now is indeed bright and the banks look set to give more loans, despite recession. Of course, the loans will be given out keeping in mind banking system’s security.