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by Amy Lillard
(6/19/2012) While some market indicators are pointing to improvements in the housing market and the general economy, the banking industry continues to struggle.
Regulators closed three banks in Tennessee, Georgia and Florida last week. The total number of banks closed in 2012 is now at 31. The banks had total assets of $484 million and resulted in losses to the FDIC Deposit Insurance Fund of $100 million.
Overall, the pace of banking failures is slower than it has been in recent years. In 2011, 92 banks failed. In 2010, 157 banks failed, a record year.
The number of Problem Banks, as listed on the confidential FDIC Problem Bank List, is currently 772. That’s 10.5% of all banking institutions. Reports are indicating that the number of failures since 2008, when the current financial crisis could be said to begin, are actually greater than those associated with the savings-and-loan meltdown in the 1980s and 1990s.
The reasons behind the recent failures included continuing fallout from the housing bubble, defaulted loans, and investor difficulties. But in general, banks have been failing when they are in danger of running out of capital to meet their financial obligations. The FDIC takes over these banks to protect existing assets and those that bank there. After seizing a bank, the FDIC will seek a buyer for the institution, or will sell off assets to raise money for customers and creditors.
If you bank at a institution that fails, the FDIC covers all individuals for up to $100,000 in deposits at insured banks. That covers CDs, savings, and checking. Retirement accounts are covered up to $250,000. Beyond these limits, the FDIC is not required to reimburse you. But in many cases they will if enough money is raised after selling the bank’s assets.
Other things to know if you bank at a failed bank:
- No paperwork is needed to transfer to new ownership
- The FDIC may restrict access to your funds for a few days, but ATM withdrawals will still be available.
- Any deposits will be held with the new institution.
- Loans will be unchanged, including terms and payment due dates.
For additional reading:
Bank Failures in Brief: http://www.fdic.gov/bank/historical/bank/
What to do if your bank fails: A 4-step checklist: http://www.moneycrashers.com/what-to-do-bank-failure/
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