Word of the Day: Texas Ratio (Banking)

From Chris Brunner of LewRockwell.com via Wikipedia:

Developed by Gerard Cassidy, the Texas ratio is a measure of a bank’s credit troubles. Basically, the higher the ratio, the worse the situation is for that particular bank. Banks with a ratio of 100 and higher are in very serious danger of collapse, and banks with a ratio of 50 or higher are vulnerable.

This is the formula I used:
100 * ((Non-performing Assets – U.S guaranteed loans) + Other REO) / (Equity + Loss Reserves)

And some recent numbers from Dr. Housing Bubble:

Chart #4 – Texas Ratio at Big Banks

Source:  BankRegdata

Follow the BankRegdata link. Of the world’s 30 largest banks, SunTrust is the only one with a Texas ratio over 50. LewRockwell.com has October, 2009 Texas ratios for hundreds of U.S. banks, with dozens and dozens having ratios above 100.

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