Colonial goes under in biggest US bank failure of the year

  • AFP, Washington
  • |
  • Updated: Aug 15, 2009 10:36 IST
Colonial became the largest US bank to fail this year after it was declared bankrupt and had the bulk of its assets taken over by rival BB&T, the government banking insurer has said.

All of Alabama-based Colonial's 346 branches will reopen on Saturday "and operate as branches of BB&T," the Federal Deposit Insurance Corporation (FDIC) said in a statement.

"Deposits will continue to be insured by the FDIC," the agency said.

After suffering no bank failures at all in 2005 and 2006, the US banking system saw three banks going under in 2007, followed by 25 in 2008.

With its bankruptcy on Friday, Colonial became the 74th FDIC-insured institution to fail in the United States so far in 2009 -- highlighting the extreme stress that the global financial crisis has placed on US banks.

As of the end of June, Colonial Bank's total assets were 25 billion dollars and its total deposits were some 20 billion dollars.

While BB&T will obtain around 22 billion dollars in assets, the FDIC said it would keep the rest "for later disposition."

FDIC Chairman Sheila Bair assured that while the last 18 months had put unprecedented strain on the financial system, the agency was performing as intended.

"Today, after protecting almost 300 billion dollars in deposits since the current financial crisis began, the FDIC's guarantee is as certain as ever," she said.

 

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