List Of Failed Banks In The Last 50 Years, What Happened And Why?
Summary:
We explore notable bank failures over the past fifty years, examining the circumstances and reasons behind each collapse. By understanding these failures, we gain insights into the vulnerabilities of the banking system and the importance of regulatory oversight.
Bank failures are significant events in the financial world, often resulting from a mix of poor management, economic downturns, and systemic issues. This article looks at some well-known bank failures, diving into why and how they happened. By learning about these collapses, we can better understand the weaknesses in the banking system and why strong regulations are so important.
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List of the last 100 failed banks
Unfortunately, the list of failed U.S. is pretty long. Here is a list of the last 100 failed banks (as reported by FDIC) but you can see the full list here.
| Republic First Bank dba Republic Bank | PA | 2024 | Fulton Bank, National Association |
| Citizens Bank | IA | 2023 | Iowa Trust & Savings Bank |
| Heartland Tri-State Bank | KS | 2023 | Dream First Bank, N.A. |
| First Republic Bank | CA | 2023 | JPMorgan Chase Bank, N.A. |
| Signature Bank | NY | 2023 | Flagstar Bank, N.A. |
| Almena State Bank | KS | 2020 | Equity Bank |
| First City Bank of Florida | FL | 2020 | United Fidelity Bank, fsb |
| The First State Bank | WV | 2019 | MVB Bank, Inc. |
| Resolute Bank | OH | 2019 | United Fidelity Bank, fsb |
| Louisa Community Bank | KY | 2019 | Kentucky Farmers Bank Corporation |
| Enloe State Bank | TX | 2019 | Legend Bank, N.A. |
| Washington Federal Bank for Savings | IL | 2017 | Royal Savings Bank |
| The Farmers and Merchants State Bank of Argonia | KS | 2017 | Conway Bank |
| Fayette County Bank | IL | 2017 | United Fidelity Bank, fsb |
| Guaranty Bank, (d/b/a BestBank in Georgia & Michigan) | WI | 2017 | First-Citizens Bank & Trust Company |
| First NBC Bank | LA | 2017 | Whitney Bank |
| Proficio Bank | UT | 2017 | Cache Valley Bank |
| Seaway Bank and Trust Company | IL | 2017 | State Bank of Texas |
| Harvest Community Bank | NJ | 2017 | First-Citizens Bank & Trust Company |
| Allied Bank | AR | 2016 | Today’s Bank |
| The Woodbury Banking Company | GA | 2016 | United Bank |
| First CornerStone Bank | PA | 2016 | First-Citizens Bank & Trust Company |
| Trust Company Bank | GA | 2016 | The Bank of Perry |
| North Milwaukee State Bank | WI | 2016 | First-Citizens Bank & Trust Company |
| Hometown National Bank | IL | 2016 | Bay Bank |
| The Bank of Georgia | GA | 2015 | Fidelity Bank |
| Premier Bank | CO | 2015 | United Fidelity Bank, fsb |
| Edgebrook Bank | IL | 2015 | Republic Bank of Chicago |
| First National Bank of Crestview | FL | 2015 | First NBC Bank |
| Doral Bank | PR | 2015 | Banco Popular de Puerto Rico |
| Capitol City Bank & Trust Company | GA | 2015 | First-Citizens Bank & Trust Company |
| Highland Community Bank | IL | 2015 | United Fidelity Bank, fsb |
| First Security Bank of Malta | MT | 2014 | Stockman Bank of Montana |
| Frontier Bank, FSB | MO | 2014 | Liberty Bank |
| NBRS Financial | MD | 2014 | Howard Bank |
| GreenChoice Bank, fsb | IL | 2014 | Providence Bank, LLC |
| Eastside Commercial Bank | MI | 2014 | FirstMerit Bank, N.A. |
| Wausaukee Comty. Bank | WI | 2014 | Bank First National |
| The Freedom State Bank | OK | 2014 | Alva State Bank & Trust Company |
| Valley Bank | IA | 2014 | Great Southern Bank |
| Valley Bank | IL | 2014 | Heartland Bank and Trust Company |
| Columbia Savings Bank | KS | 2014 | Security Bank of Kansas City |
| Slavie Federal Savings Bank | MD | 2014 | Bay Bank, FSB |
| AztecAmerica Bank | IL | 2014 | Republic Bank of Chicago |
| Allendale County Bank | SC | 2014 | Palmetto State Bank |
| Vantage Point Bank | PA | 2014 | First Choice Bank |
| Millennium Bank, National Association | VA | 2014 | WashingtonFirst Bank |
| Capitol City Bank & Trust Company | GA | 2015 | First-Citizens Bank & Trust Company |
| Highland Community Bank | IL | 2015 | United Fidelity Bank, fsb |
| First Security Bank of Malta | MT | 2014 | Stockman Bank of Montana |
| Frontier Bank, FSB | MO | 2014 | Liberty Bank |
| NBRS Financial | MD | 2014 | Howard Bank |
| GreenChoice Bank, fsb | IL | 2014 | Providence Bank, LLC |
| Eastside Commercial Bank | MI | 2014 | FirstMerit Bank, N.A. |
| Wausaukee Comty. Bank | WI | 2014 | Bank First National |
| The Freedom State Bank | OK | 2014 | Alva State Bank & Trust Company |
| Valley Bank | IA | 2014 | Great Southern Bank |
| Valley Bank | IL | 2014 | Heartland Bank and Trust Company |
| Columbia Savings Bank | KS | 2014 | Security Bank of Kansas City |
| Slavie Federal Savings Bank | MD | 2014 | Bay Bank, FSB |
| AztecAmerica Bank | IL | 2014 | Republic Bank of Chicago |
| Allendale County Bank | SC | 2014 | Palmetto State Bank |
| Vantage Point Bank | PA | 2014 | First Choice Bank |
| Millennium Bank, National Association | VA | 2014 | WashingtonFirst Bank |
| Syringa Bank | ID | 2014 | Sunwest Bank |
| The Bank of Union | OK | 2014 | BancFirst |
| DuPage National Bank | IL | 2014 | Republic Bank of Chicago |
| Texas Community Bank, National Association | TX | 2013 | Spirit of Texas Bank, SSB |
| Bank of Jackson County | FL | 2013 | First Federal Bank of Florida |
| First National Bank also operating as The National Bank of El Paso | TX | 2013 | PlainsCapital Bank |
| The Community’s Bank | CT | 2013 | No Acquirer |
| Sunrise Bank of Arizona | AZ | 2013 | First Fidelity Bank, National Association |
| Community South Bank | TN | 2013 | CB&S Bank, Inc. |
| Bank of Wausau | WI | 2013 | Nicolet National Bank |
| First Community Bank of Southwest Florida (also operating as Community Bank of Cape Coral) | FL | 2013 | C1 Bank |
| Mountain National Bank | TN | 2013 | First Tennessee Bank, National Association |
| 1st Commerce Bank | NV | 2013 | Plaza Bank |
| Banks of Wisconsin d/b/a Bank of Kenosha | WI | 2013 | North Shore Bank, FSB |
| Central Arizona Bank | AZ | 2013 | Western State Bank |
| Sunrise Bank | GA | 2013 | Synovus Bank |
| Pisgah Community Bank | NC | 2013 | Capital Bank, N.A. |
| Douglas County Bank | GA | 2013 | Hamilton State Bank |
| Parkway Bank | NC | 2013 | CertusBank, National Association |
| Chipola Community Bank | FL | 2013 | First Federal Bank of Florida |
| Heritage Bank of North Florida | FL | 2013 | FirstAtlantic Bank |
| First Federal Bank | KY | 2013 | Your Community Bank |
| Gold Canyon Bank | AZ | 2013 | First Scottsdale Bank, National Association |
| Frontier Bank | GA | 2013 | HeritageBank of the South |
| Covenant Bank | IL | 2013 | Liberty Bank and Trust Company |
| 1st Regents Bank | MN | 2013 | First Minnesota Bank |
| Westside Community Bank | WA | 2013 | Sunwest Bank |
| Community Bank of the Ozarks | MO | 2012 | Bank of Sullivan |
| Hometown Community Bank | GA | 2012 | CertusBank, National Association |
| Citizens First National Bank | IL | 2012 | Heartland Bank and Trust Company |
| Heritage Bank of Florida | FL | 2012 | Centennial Bank |
| NOVA Bank | PA | 2012 | No Acquirer |
| Excel Bank | MO | 2012 | Simmons First National Bank |
| First East Side Savings Bank | FL | 2012 | Stearns Bank N.A. |
| GulfSouth Private Bank | FL | 2012 | SmartBank |
| First United Bank | IL | 2012 | Old Plank Trail Community Bank, National Association |
| Truman Bank | MO | 2012 | Simmons First National Bank |
| First Commercial Bank | MN | 2012 | Republic Bank & Trust Company |
| Waukegan Savings Bank | IL | 2012 | First Midwest Bank |
| Jasper Banking Company | GA | 2012 | Stearns Bank N.A. |
Notable bank failures in the last 50 years
The list below summarizes some of the most notable bank failures in recent history, along with their causes and consequences:
| Bank Name | Location | Failure Date | Cause of Failure |
|---|---|---|---|
| Lehman Brothers | New York, USA | September 15, 2008 | Subprime mortgage crisis, excessive risk-taking |
| Washington Mutual | Seattle, USA | September 25, 2008 | Subprime mortgage losses, bank run |
| Continental Illinois National Bank and Trust | Chicago, USA | May 17, 1984 | Bad loans, inadequate capital |
| Barings Bank | London, UK | February 26, 1995 | Unauthorized trading, inadequate oversight |
| IndyMac Bank | Pasadena, USA | July 11, 2008 | Subprime mortgage crisis, liquidity issues |
What happened in the case of these major bank failures?
Lehman Brothers
Failure Date: September 15, 2008
Cause of Failure: Lehman Brothers, a global financial services firm, collapsed due to its heavy involvement in subprime mortgages and excessive risk-taking. The firm’s leverage and reliance on short-term funding made it vulnerable to market shocks. When the housing bubble burst, Lehman faced massive losses, leading to a loss of investor confidence and eventual bankruptcy. This failure significantly contributed to the global financial crisis of 2008.
Cause of Failure: Lehman Brothers, a global financial services firm, collapsed due to its heavy involvement in subprime mortgages and excessive risk-taking. The firm’s leverage and reliance on short-term funding made it vulnerable to market shocks. When the housing bubble burst, Lehman faced massive losses, leading to a loss of investor confidence and eventual bankruptcy. This failure significantly contributed to the global financial crisis of 2008.
Washington Mutual
Failure Date: September 25, 2008
Cause of Failure: Washington Mutual, once the largest savings and loan association in the U.S., failed primarily due to its exposure to subprime mortgages. The bank’s aggressive lending practices and insufficient risk management led to significant loan defaults. As housing prices plummeted, the bank faced a liquidity crisis, resulting in a massive bank run. The FDIC intervened, marking the largest bank failure in U.S. history.
Cause of Failure: Washington Mutual, once the largest savings and loan association in the U.S., failed primarily due to its exposure to subprime mortgages. The bank’s aggressive lending practices and insufficient risk management led to significant loan defaults. As housing prices plummeted, the bank faced a liquidity crisis, resulting in a massive bank run. The FDIC intervened, marking the largest bank failure in U.S. history.
Continental Illinois National Bank and Trust
Failure Date: May 17, 1984
Cause of Failure: Continental Illinois, at the time the seventh-largest bank in the U.S., failed due to bad loans and inadequate capital. The bank’s aggressive lending to the oil and gas industry, coupled with a lack of diversification, led to significant losses. A bank run ensued when news of its troubles became public, prompting a government bailout and takeover.
Cause of Failure: Continental Illinois, at the time the seventh-largest bank in the U.S., failed due to bad loans and inadequate capital. The bank’s aggressive lending to the oil and gas industry, coupled with a lack of diversification, led to significant losses. A bank run ensued when news of its troubles became public, prompting a government bailout and takeover.
Barings Bank
Failure Date: February 26, 1995
Cause of Failure: Barings Bank, the oldest merchant bank in London, collapsed due to unauthorized trading by a rogue trader, Nick Leeson. Leeson’s speculative bets in the derivatives market went unnoticed due to inadequate oversight and internal controls. His actions led to losses exceeding $1 billion, forcing the bank into bankruptcy.
Cause of Failure: Barings Bank, the oldest merchant bank in London, collapsed due to unauthorized trading by a rogue trader, Nick Leeson. Leeson’s speculative bets in the derivatives market went unnoticed due to inadequate oversight and internal controls. His actions led to losses exceeding $1 billion, forcing the bank into bankruptcy.
IndyMac Bank
Failure Date: July 11, 2008
Cause of Failure: IndyMac Bank’s failure was primarily due to its heavy involvement in the subprime mortgage market. The bank’s focus on high-risk mortgage lending and reliance on brokered deposits made it vulnerable to market fluctuations. When the housing market collapsed, IndyMac faced severe liquidity issues, leading to a run on the bank and subsequent closure by the FDIC.
Cause of Failure: IndyMac Bank’s failure was primarily due to its heavy involvement in the subprime mortgage market. The bank’s focus on high-risk mortgage lending and reliance on brokered deposits made it vulnerable to market fluctuations. When the housing market collapsed, IndyMac faced severe liquidity issues, leading to a run on the bank and subsequent closure by the FDIC.
How financial crises coincide with bank failures:
The Asian Financial Crisis (1997-1998)
The Asian financial crisis began in Thailand in July 1997 and quickly spread to neighboring East Asian countries, causing widespread economic turmoil. This crisis was triggered when Thailand decided to float its currency, the baht, after depleting its foreign exchange reserves trying to defend it against speculative attacks. This led to a series of currency devaluations and capital flight across the region.
Key banks that failed
| Bank Name | Why It Happened |
|---|---|
| Siam Commercial Bank (Thailand) | Severe liquidity issues due to exposure to non-performing loans and the devaluation of the baht. |
| Hokkaido Takushoku Bank (Japan) | Failed due to non-performing loans and exposure to risky real estate investments. |
| Yamaichi Securities (Japan) | Collapsed due to undisclosed debts and heavy losses in the financial markets. |
Causes of the crisis
- Excessive borrowing in foreign currencies by banks and corporations.
- Lack of regulatory oversight and weak financial supervisory frameworks.
- Fixed exchange rate systems that led to unsustainable currency pegs.
- Rapid capital flight and speculative attacks on currencies.
- Exposure to high-risk real estate investments and non-performing loans.
Impact and response to the Asian Financial Crisis
The Asian financial crisis led to massive capital flight, severe currency devaluations, and deep recessions in affected countries, particularly in Thailand, Indonesia, and South Korea. Governments and international organizations, including the IMF, provided substantial bailout packages with stringent economic reforms to stabilize economies and restore confidence. The recovery involved significant structural reforms, such as improving regulatory frameworks, enhancing transparency, and adopting more flexible exchange rate systems.
The Global Financial Crisis (2007-2008)
The Global Financial Crisis was a severe worldwide economic crisis considered the most serious since the Great Depression. It began in 2007 with a crisis in the subprime mortgage market in the United States and developed into a full-blown international banking crisis with the collapse of Lehman Brothers on September 15, 2008.
Key banks that failed
| Bank Name | Why It Happened |
|---|---|
| Siam Commercial Bank (Thailand) | Severe liquidity issues due to exposure to non-performing loans and the devaluation of the baht. |
| Hokkaido Takushoku Bank (Japan) | Failed due to non-performing loans and exposure to risky real estate investments. |
| Yamaichi Securities (Japan) | Collapsed due to undisclosed debts and heavy losses in the financial markets. |
Causes of the crisis
- High leverage and risky lending practices by financial institutions.
- Complex financial products like mortgage-backed securities obscuring true risk levels.
- Inadequate regulatory frameworks failing to manage systemic risks.
- Collapse of the housing market leading to widespread mortgage defaults.
- Significant declines in consumer wealth and credit availability.
Impact and response to the Global Financial Crisis
The global financial crisis caused widespread economic disruption, marked by the collapse of major financial institutions, sharp declines in consumer wealth, and prolonged unemployment. Governments and central banks worldwide implemented extraordinary measures, including massive capital infusions, interest rate cuts, and fiscal stimulus packages, to stabilize financial systems and revive economic activity. Long-term recovery focused on regulatory reforms, enhancing risk management practices, and ensuring better oversight to prevent future crises.
Expert Insight
Identifying troubled banks involves monitoring key indicators like liquidity ratios, capital adequacy, and loan quality. Financial institutions employ stress tests and regular audits to preempt issues. AI tools, enhance these processes by providing real-time data analytics, enabling proactive measures.
Depositors can safeguard their assets by ensuring their bank accounts fall within the insured limits provided by entities like the FDIC. Additionally, diversifying their deposits across multiple institutions can mitigate risks associated with a single bank’s failure, providing a more secure financial footing.” – Russell Rosario, co-founder and CFO of Profit Leap
FAQ
How do government bailouts affect the economy after a bank failure?
Government bailouts can stabilize the financial system by providing necessary liquidity and restoring confidence among depositors and investors. However, they can also lead to increased public debt and potential long-term economic implications, such as inflation or reduced spending in other critical areas.
What are the typical warning signs of a bank nearing failure?
Warning signs of a bank nearing failure include significant declines in stock prices, rising levels of non-performing loans, liquidity issues, negative earnings reports, and increased regulatory scrutiny. Public confidence might wane, leading to large-scale withdrawals (a bank run).
How does the failure of major banks impact global financial markets?
The failure of major banks can lead to widespread panic and loss of confidence in financial markets, causing sharp declines in stock prices, increased volatility, and tightening credit conditions. This can result in a global economic slowdown as businesses and consumers reduce spending and investment.
What measures can banks take to prevent failure during economic downturns?
Banks can prevent failure during economic downturns by maintaining adequate capital reserves, diversifying their investment portfolios, implementing robust risk management practices, and ensuring transparent and prudent lending practices. Regular stress testing and compliance with regulatory standards are also crucial in mitigating risks.
Key takeaways
- Excessive borrowing in foreign currencies by banks and corporations contributed significantly to the Asian financial crisis.
- Lack of regulatory oversight and weak financial supervisory frameworks exacerbated the vulnerabilities in the financial systems.
- Fixed exchange rate systems led to unsustainable currency pegs, making economies susceptible to speculative attacks.
- The global financial crisis was driven by high leverage and risky lending practices by financial institutions, combined with inadequate regulatory frameworks.