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More than 300 U.S. savings institutions failed in the past four years

30 December 2010 09:06 (UTC +04:00)

Baku - APA-Economics. More than 300 U.S. banks and savings institutions failed in the past four years. But there are huge differences in how sick they were when regulators seized them, The Wall Street Journal reported.

A total of 50 failed banks had negative capital by the time regulators swooped in, meaning their capital was depleted by losses. And those shutdowns came as long as two years after government officials issued their first warning about financial inadequacies, analysts at the KBW Inc. unit found.

Timur Braziler, an analyst at Keefe, Bruyette & Woods, says the differences are a sign that "bank regulators and state officials simply can’t get to these banks fast enough," citing the 860 battered institutions on the Federal Deposit Insurance Corp.’s "problem list" as of Sept. 30. "There’s just not enough manpower and coordination to catch all these failing institutions at once."

Killing a bank too soon could mean getting rid of a financial institution that might recover to make solid, profitable loans. Waiting until all of a bank’s capital is gone deepens the losses suffered by the FDIC’s deposit-insurance fund, putting additional strain on surviving banks that pay into the fund.

Some of the banks classified by regulators as well-capitalized at the time of their failure were dragged down by a parent company that collapsed. Two of the nine banks owned by FBOP Corp., a bank-holding company in Oak Park, Ill., had a tangible common equity ratio of more than 10% when the bank-holding company was seized by regulators in October 2009. At other banks, losses ballooned shortly after regulators examined their financial statements and loan files, causing sudden death.

The Keefe, Bruyette & Woods analysis includes failures from February 2007 to July 2010. A total of 157 banks have been seized in 2010, up from 140 in 2009.

Imperial Savings & Loan Association, based in Martinsville, Va., failed in August, more than a year after losses left the tiny thrift with negative capital. The demise is expected to cost the FDIC’s insurance fund $3.5 million.

William Cody Spencer founded Imperial in July 1929, using $300 of savings from fellow Baptist church members, running the minority-owned thrift from his home for 30 years. In 2008, the Office of Thrift Supervision issued a formal warning about Imperial’s deteriorating financial condition.