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End of the bank failure spike?

By Claes Bell · Bankrate.com
Tuesday, January 31, 2012
Posted: 4 pm ET

We may be finally coming to the end of the instability that wracked the American banking system. As my colleague David McMillan blogged earlier this month, the FDIC's numbers for bank failures were way down in 2011. On top of that, last month, the FDIC's board cut the 2012 operating budget for the organization by 15.4 percent over 2011, saying:

"It appears that the peak of the recent banking failures may have passed and the FDIC is now positioned to begin reducing budget and staffing levels while continuing to fulfill our mission and maintain readiness to handle remaining bank failure and supervisory challenges," said FDIC Acting Chairman Martin Gruenberg.

Taking a look at the chart below chronicling FDIC actions to prevent and deal with bank failures, it sure looks like we're headed back to a state of relative peace and quiet we enjoyed prior to the 2008-2009 financial crisis. It's also interesting to note how the recent spike is dwarfed, at least in terms of the sheer quantity of failures, by the savings and loan crisis of the mid-'80s, although I'd bet the collective size of the institutions that failed in the most recent crisis was bigger.

Bank failures since 1934

Bank failures have notably tapered off.

At any rate, as long as Europe doesn't plunge the world into another apocalyptic financial crisis, your bank should be safest it's been than any time since 2008. While most bank customers experience bank failures as more like temporary inconveniences than the calamitous bank runs of pre-FDIC America, it's still nice not to worry about having your accounts shuffled around by an FDIC-engineered buyout or simply closed and the money returned.

If you're worried your bank might be one of the walking wounded that won't make it out of 2012, feel free to check out Bankrate's free, recently updated Safe & Sound ratings which assess the stability of banks.

What do you think? Is the bank failure epidemic over? Or is this just a temporary dip?

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1 Comment
Meagan
February 01, 2012 at 2:22 pm

I think the massive bank failures are over too. And I think that although bank failures did not have a dramatic impact on consumers lives, they did contribute to the decline in available credit for consumers. With this leveling off, we should see banks opening up more channels of credit to consumers, such as easier terms for getting a mortgage or car loan.