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Wednesday, January 08, 2020

Four Bank Failures in 2019

by Calculated Risk on 1/08/2020 04:08:00 PM

There were four bank failures in 2019. This was up from zero in 2018. The median number of failures since the FDIC was established in 1933 was 7 - so 4 failures in 2019 was well below the median.

The great recession / housing bust / financial crisis related failures have been behind us for a few years.

The first graph shows the number of bank failures per year since the FDIC was founded in 1933.

FDIC Bank Failures Click on graph for larger image.

Typically about 7 banks fail per year.

Note: There were a large number of failures in the '80s and early '90s. Many of these failures were related to loose lending, especially for commercial real estate.  Also, a large number of the failures in the '80s and '90s were in Texas with loose regulation.

Even though there were more failures in the '80s and early '90s than during the recent crisis, the recent financial crisis was much worse (larger banks failed and were bailed out).

Pre-FDIC Bank Failures The second graph includes pre-FDIC failures. In a typical year - before the Depression - 500 banks would fail and the depositors would lose a large portion of their savings.

Then, during the Depression, thousands of banks failed. Note that the S&L crisis and recent financial crisis look small on this graph.