US regulators have closed 141 banks so far this year

2010-11-06 08:06

Washington – Regulators shut down banks in Maryland and California yesterday, bringing the 2010 total to 141.

This topped the 140 shut down last year and was the most in a year since the savings and loan crisis two decades ago.

The Federal Deposit Insurance took over K Bank, based in Randallstown, Maryland, with $538.3 million (R4 billion) in assets. It also closed Western Commercial Bank in Woodland Hills, California, with $98.6 million in assets.

Like those two banks, most banks that have failed this year are smaller, on average, than those that succumbed in 2009.

That has meant the deposit insurance fund has suffered a milder loss, which has reached $21 billion so far this year, compared with $36 billion in 2009.

Still, banks, especially small community institutions, are falling as soured loans have mounted and the economy has sputtered.

The wave of bank shutdowns points to the lingering power of the recession more than a year after its official end.

Florida, Georgia, Illinois and California have each seen bank failures in the double digits this year. Some communities in those states are still reeling from the financial meltdown that brought an avalanche of bad loans, especially for commercial property.

The closures have compounded the problems in areas already straining under high unemployment, foreclosed homes, and vacant malls and office buildings.

The pace of failures has accelerated as banks’ losses on loans for commercial property and development have mounted.

Many companies have shut down in the recession, vacating shopping malls and office buildings financed by the loans. That has brought delinquent loan payments and defaults by commercial developers.

The 2009 total of bank failures had been the highest annual toll since 1992, at the height of the savings and loan crisis.

Twenty-five banks failed in 2008, the year the financial crisis struck with force. Only three succumbed in 2007.

The growing bank failures have sapped billions of dollars out of the Federal Deposit Insurance’s deposit insurance fund.

It fell into the red last year, and its deficit stood at $15.2 billion as of June 30.

Depositors’ money – insured up to $250 000 per account – is not at risk, with the Federal Deposit Insurance backed by the government.

That insurance cap was made permanent in the financial overhaul law enacted in July.

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