photo credit: Infrogmation[/caption]
The Failed Bank List of The Federal Deposit Insurance Corp. now shows 103 entries of US banks that went belly up. The list includes banks which have failed since October 1, 2000. The most recent 7 failures were on the same day as many European banks passed stress tests with honors.
In Europe regulators simulated how banking institutions would survive an increased recession and a debt crisis. The banks were ask to simulate losses on debt held for trading purposes. These tests basically assess the capital strength of a bank. Bonds that the banks were holding were excluded from these tests. There were a few banks that did not make it, but Britain's four biggest banks, Barclays, HSBC and the bailed-out Royal Bank of Scotland and Lloyds Banking Group, comfortably passed the tests and reported by The Guardian.
Many US banks on the other hand are very low on capital and go out of business as a result of minor breezes. There are a lot of bad debts tied to commercial and residential mortgages, which already resulted in over 100 bank failures in the US and experts believe that this is not all.
These are the banks that closed on Friday, July 23:
Home Valley Bank, Cave Junction OR
SouthwestUSA Bank, Las Vegas NV
Community Security Bank, New Prague MN
Thunder Bank, Sylvan Grove KS
Williamsburg First National Bank, Kingstree SC
Crescent Bank and Trust Company, Jasper GA
Sterling Bank, Lantana FL
One of these banks is fairly large, Crescent Bank and Trust Company in Georgia, with more than $1bn in assets. The other six had $1bn in assets combined.
These figures only sound large. If put in reference to the largest US banks, Wells Fargo & Company (WFC), JPMorgan Chase & Co. (JPM), Citigroup, Inc. (C), Bank of America Corporation (BAC), that have market caps of $137.85B BAC, $116.48B C, $158.66B JPM and $142.86B WFC, these bank collapses are very tiny and should not have any real impact on the economy beyond their immediate circles.
Some properly done stress test could possibly prevent even these smaller bank failures. Even if they are small, it creates a lot of uncertainty for those that banked with the institutions that were now taken over by the Federal Deposit Insurance Corp..
If you have more than $250,000 in the bank, you should make sure that not one bank carries all your money. Each depositor is usually insured to $250,000 per insured bank. It might be more, but you should ask your banker to make sure.
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