89 banks go belly up in 09; Sep sees five failures in one day | india | Hindustan Times
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89 banks go belly up in 09; Sep sees five failures in one day

india Updated: Sep 06, 2009 12:02 IST

Five more US banks shut down on September 4, pushing the total failures to a whopping 89 entities so far this year.

The count of collapses is more than three-fold that of 2008, when 25 banks went out of business in wake of the raging financial meltdown. Bank failures are mounting even as the economy is showing tentative signs of recovery slowly.

First Bank of Kansas, InBank, Vantus Bank, Platinum Community Bank and First State Bank were closed down on September 4, according to the Federal Deposit Insurance Corporation (FDIC).

The agency, which acts as the receiver of failed banks, would incur a total cost of USD 401.3 million due to the collapse of these five entities.

The failure of Vantus Bank alone would cost as much as USD 168 million to the FDIC.

In August, a stunning 15 banks went belly up.

Recently, the FDIC said the number of problem banks- those at the risk of failing have shot up to 416 in the June quarter.
Amid hopes of recovery, the nation's jobless rate jumped to a 26-year-high of 9.7 per cent in August. Higher unemployment could result in increased defaults, increasing difficulties for small banks and financial institutions.

A staggering 24 entities went out of business in July, the highest for any month in 2009. Seven banks went out of business on July 2 and July 24.

The authorities closed down nine banks in June and seven in May.

First Coweta Bank, CapitalSouth Bank, eBank, Community First Bank, Mutual Bank and Mainstreet Bank are among those which have collapsed this year.

Latest official figures show that institutions insured by the FDIC charged off USD 48.9 billion in uncollectible loans during the quarter, up from USD 26.4 billion a year earlier.

Meanwhile, the US Treasury Department has suggested new stringent capital and liquidity standards for banking firms worldwide aimed at ensuring a stable financial system.

The proposals come in the wake of the worst ever financial turmoil since the Great Depression in the 1930s.