Bankrate's latest Safe & Sound star ratings show a banking sector that appears stronger than it was a year ago. Of 7,149 banks and thrifts nationwide insured by the Federal Deposit Insurance Corp., just 6.55 percent received the lowest rating of one star based on performance reports filed with the FDIC in the fourth quarter of 2012. That's down from 9.33 percent a year earlier.
That may be due in part to the weakest institutions being weeded out. All told, 51 banks and thrifts were shuttered by the FDIC in 2012, and that's down from 92 in 2011.
The work that banks have done to shore up their financial position also was reflected in the numbers, with 13.4 percent of banks earning the highest five-star rating, compared to 12.76 percent a year earlier. Overall, 87.08 percent of FDIC-insured banks earned a rating of three stars or above, meaning they are considered "performing."
Credit unions' safety and soundness also appeared to improve over the course of 2012, with the percentage of one-star institutions falling from 1.91 percent to 1.12 percent. Overall, 92.14 percent of credit unions rated achieved three stars or higher.
That's a good thing for consumers. While most depositors are well-protected by the FDIC and the National Credit Union Administration's $250,000 worth of insurance, bank failures can be disruptive for bank customers, and the banks that take over customers' accounts don't always offer rates and terms that are comparable to those offered by the banks they're replacing.
The soundness of U.S. banks has been a major focus for politicians and regulators lately, particularly when it comes to the nation's biggest banks.
What do you think? Do have more faith in your bank than you did a few years ago?