Is the Next Bank Failure Trend on the Horizon?

It has become apparent that someone sent a memo to banks to help reignite a bank failure trend that had slowed for nearly 20 years. The proof is in the pudding with Friday’s 106th bank closure (along with six others in the same day), which by far makes the highest number of yearly closures since 1992. We all know that last year’s financial crisis is the culprit, but it makes you wonder how many more banks will close and for how many more years?

Bank Failure History

Just so you understand, the closures for 2009 are by no means the worst the United States has ever seen. Here is a quick time-line of the worst bank closures since the year 1900:

• The year 1930 saw 1,352 bank failures in that year after the Crash of 1929.
• 1982 saw 119 bank failures and 1984 saw another 106 failures.
• Every year between 1985 and 1992 saw at least 180 bank failures per year, with the peak in 1989 (535 failures) during the savings and loan crisis. The numbers tapered after 1992.

Now, in 2009, we have reached 106 bank failures and the numbers are still rising.

Is This the Beginning of Next Bank Failure Trend?

With the recession pushing forward, many banks are having a hard time staying afloat. Regulators are trying to carefully choose those banks that they seize to avoid a panic. They also hope that seizing slowly might give room for an economic recovery that could save some banks. In June, the FDIC had flagged 416 banks that were at risk of failure, which means many more could close in the coming years.

How Bank Failures Affect You

Unless you have more than $250,000 in the bank (the FDIC insurance limit), you won’t be heavily affected by the failures. You will likely receive a notice that a new bank has assumed your account, along with some new guidelines. However, it’s good to keep your eggs in more than one basket. This way, one bank closure can’t in any way effect all of your money.

Do you think we’re headed for another onset of high yearly bank failure totals?