US bank failures inching towards 100-mark

Pushing up the total number of US bank failures so far this year to close to a century, three more US banks have folded up last week even as the recession-hit economy is seeing signs of revival.

Updated: Oct 04, 2009, 13:44 PM IST

New York: Pushing up the total number of US
bank failures so far this year to close to a century, three
more US banks have folded up last week even as the
recession-hit economy is seeing signs of revival.

Indicating that the country`s financial system continues
to remain strained, the count of failures this year has gone
up to 98. This is nearly four times that of 2008, when just 25
banks went belly up dust.

Warren Bank, Jennings State Bank and Southern Colorado
National Bank were shut down by the authorities on October 2.

The Federal Deposit Insurance Corporation, the agency
which insures the deposits in more than 8,000 banks, said the
three failures would cost its fund about USD 293.3 million.

Staring at soaring bank collapses, the FDIC recently
proposed banks to pre-pay fees, which would bolster the
agency`s insurance fund by USD 45 billion.

Small and medium banks are facing the worst impact of the
financial turmoil, as rising unemployment is resulting in
higher defaults.

In September, 11 banks failed while July saw 24 entities
biting dust, the highest for any month in 2009.

Since July, a whopping 53 banks have collapsed and the
numbers are anticipated to rise before the economy fully
stabilises.

According to FDIC, the count of problem banks, which are
at the risk of failing, have jumped to 416 in the second
quarter of 2009.

In August, the country saw the biggest bank failure of
2009, when Colonial Bank, which had assets worth USD 25
billion as on June 30, went out of business.

The collapse of Colonial Bank was estimated to cost FDIC
nearly USD 2.8 billion.

During the same month, 15 other banks also went out of
business, while the authorities shut down nine banks in June
and seven in May.

Peoples Community Bank, Security Bank of Jones County,
ebank, First Coweta Bank, Mainstreet Bank, Affinity Bank,
Integrity Bank and Community First Bank are among those which
were closed this year.

Despite disappointing news from the banking and labour
front, the pace of economic decline is coming down. In the
second quarter of 2009, US GDP shrank 0.7 per cent, much less
than the earlier projection of one per cent.

Bureau Report