In two separate notices, the Federal Reserve on Friday,
March 27 and this morning March 30, announced the addition of two more banks to
its watch list. This brings the total
number of banks added to the
The banks are added to the watch list by means of entering
into a legal agreement with the local Federal Reserve Bank in the region where
the bank is located. In this instance,
BankEast of Knoxville, Tennessee and its bank holding company parent, BankEast
Corporation, also of
As the second bank, First State Bank of Red Bud, Red Bud, Illinois, is a state chartered bank, not only is the Federal Reserve Bank of St. Louis, St. Louis, Missouri a party to the agreement, but also the Illinois Department of Financial and Professional Regulation Division of Banking, Springfield, Illinois.
Written agreements of this type are designed to establish firm rules and regulations under which the bank will be permitted to stay in business as long as they conform to the terms of the agreement. A typical agreement usually forbids the distribution of dividends without approval of the Reserve Bank; prohibits any action that would further reduce the capital of the bank, and imposes restrictions on the non-bank subsidiaries.
Going forward, the bank will be required to provide the Reserve Bank with detailed progress reports showing compliance with the terms of the agreement.