The number of banks and total assets on the Federal Deposit Insurance Corp.'s "problem bank list" increased again in the 2023 fourth quarter.

There were 52 banks on the list for a total of $66.3 billion in assets at Dec. 31, 2023, up from 44 banks for a total of $53.5 billion in assets in the linked quarter. The list is also up from the year-ago period, when 39 banks were on it and total assets were $47.5 billion.

The 52 banks on the list is the highest number since the first quarter of 2021, when 55 banks were on the list.

"Given the stage of the cycle we're in, frankly, it would not be surprising to see an increase in the problem bank list," FDIC Chairman Martin Gruenberg said on a call with reporters. "At this stage, the numbers are not particularly alarming, but I think it's something we'll be paying close attention to over the coming quarters."

A bank is considered a "problem bank" by the FDIC when its CAMELS composite rating is 4 or 5. The CAMELS scale measures a bank's capital adequacy, asset quality, management, earnings, liquidity and sensitivity on a scale of 1 to 5, with 5 being the worst.

The FDIC is not the only institution stepping up its supervision of banks and downgrading CAMELS ratings. Last month, Federal Reserve Vice Chair for Supervision Michael Barr said the agency has increasingly moved to downgrade banks' regulatory ratings and hand down more supervisory findings and enforcement actions.

Credit unions are also seeing deteriorating CAMELS ratings, National Credit Union Administration Chairman Todd Harper said last month. The increase comes as the credit union industry's credit quality worsens.

Credit quality also worsened for banks, with deterioration in banks' commercial real estate (CRE) and credit card portfolios most "evident," Gruenberg said. In the 2023 fourth quarter, the noncurrent rate for CRE loans reached its highest point since 2014 while that rate reached its highest point since 2011 for credit cards, the chairman said.

"Commercial real estate is a particular focus of supervisory attention by the FDIC," Gruenberg told reporters. "You have to look at it on an institution-by-institution basis. And it's very much a function of the particular institution and the quality of the underwriting. But as a general proposition in the current environment, this is a downside risk for the industry and has certainly been a high priority for the FDIC and the other banking agencies in terms of our supervisory work."

Separately, Gruenberg echoed Federal Reserve Chair Jerome Powell's sentiment that the final Basel III rule will have significant changes. "I certainly think we anticipate making changes in the final rule based on the extensive comment that we've received," Gruenberg said.

Gruenberg also confirmed the agency's latest Deposit Insurance Fund loss estimate related to the failures of Silicon Valley Bank and Signature Bank is $20.4 billion, as disclosed by PNC Financial Services Group Inc. earlier this week.

"We've notified all the institutions affected. And we've also indicated that as we move forward with this process, there may well be further valuations as we proceed," he said.

Gruenberg also said updating bank merger guidance remains a priority for the agency, but Gruenberg did not provide a timeline for those updates. "Stay tuned," he said.