Saturday, December 19, 2009

FDIC Bank Failure Update

by Bill McBride on 12/19/2009 06:22:00 PM

A few graphs and some predictions ... the first graph shows bank failures by week in 2009:

FDIC Bank Failures Click on graph for larger image in new window.

Note: Week 1 on graph ended Jan 2nd.

There have been 140 bank failures this year, and there are only a few days left to close banks in 2009.

Based on history, I think the FDIC is done for the year.

This sets the over-under line for 2010 at 140 (assuming no more failures). Will there be more bank failures in 2010 than in 2009? I'll definitely take the over (more failures in 2010 than in 2009).

FDIC Bank Failures The second graph shows bank failures by year since the FDIC was started.

The 140 bank failures this year was the highest total since 1992 (181 bank failures). Next year will probably be much higher ... although I doubt we will see as many failures as in 1988 or 1989 (470 and 534 failures respectively).

The third graph is of bank failures by number of institutions and assets, from the December Congressional Oversight Panel’s Troubled Asset Relief Program report. (ht Catherine Rampell):

FDIC Bank Failures Note: This is through Nov 30th for 2009.

From the report (page 45):

Figure 11 shows numbers of failed banks, and total assets of failed banks since 1970. It shows that, although the number of failed banks was significantly higher in the late 1980s than it is now, the aggregate assets of failed banks during the current crisis far outweighs those from the 1980s. At the high point in 1988 and 1989, 763 banks failed, with total assets of $309 billion.167 Compare this to 149 banks failing in 2008 and 2009, with total assets of $473 billion.168
Note: This is in 2005 dollars and this includes the failure of WaMu in 2008 with $307 billion in assets that didn't impact the DIF.

So my (easy) predictions: 1) The FDIC is done for 2009 (140 bank failures is the final count), 2) There will be more bank failures in 2010, and 3) there will be less failure in 2010 than the peak of the S&L crisis.