US Commercial Banks: National Profile for Quarter ending There are 6615 commercial banks in the U.S. controlling about $ 12100.74 billion in aggregate assets and $ 6010.1 billion in aggregate core deposits. Safety Profile: A total of 341 (excluding savings institutions) have failed in the country since 2008. In quarter 3 of 2010, the number of bank failure has been 49. Below we present the trends in bank failure in the country. Asset Profile: Following chart shows the distribution of assets across different categories for all banks in the country. About 17.27 % of all assets in the country are tied in residential and commercial mortgages. Liability Profile: Following chart shows the distribution of liabilities across different categories for all banks in the country. About 56.0 National Profile for Quarter ending Sep 2010 • There are 6615 commercial banks in the U.S. controlling about $ 12100.74 billion in aggregate assets and $ 6010.1 billion in aggregate core deposits. • Safety Profile: A total of 341 (excluding savings institutions) have failed in the country since 2008. In quarter 3 of 2010, the number of bank failure has been 49. Below we present the trends in bank failure in the country. •
• Asset Profile: Following chart shows the distribution of assets across different categories for all banks in the country. About 17.27 % of all assets in the country are tied in residential and commercial mortgages.
• Liability Profile: Following chart shows the distribution of liabilities across different categories for all banks in the country. About 56.04 % of the U.S. banks' liabilities come from core deposits.
• • Trends Following charts show the trend in total assets and non-performing assets (in $ billions) of all banks in the country.
Bankrupt Banks List
Analyzing Bank Failures of 2010 The trend in bank bankruptcies continues unabated. According to FDIC there have been 157 bankruptcies in 2010, which is actually higher than the number of bank failures in 2009 (140). This clearly shows that banks are still struggling to cope with the economic crisis that began in 2008. The banks have been plagued by similar problems – increased proportion of Non Performing loans in Assets portfolio through continuing Mortgage defaults .The troubles are compounded in a fragile economic environment which leads to steep decline in Earnings and erosion of Capital eventually plunging these banks into bankruptcy. Safety Ranking: An indication of the financial frailty of these banks is given by BankVega’s Safety Ranking which takes into account each of the above indicators of a bank’s financial health. BankVega Safety Ranking measures a bank’s financial strength on a scale of 1 (riskiest) to 100 (safest). We believe that it is a predictor of future distress and we had used our safety index to publish a list of 480 riskiest banks of 2010 that had the maximum probability of going bankrupt. 115 banks from that list actually went bankrupt during 2010. This shows that 24 % of the banks we had identified as falling into riskiest category actually failed. Predicting bankruptcies: The bankruptcies page displays a list of all the failed banks in recent years along with their bankruptcy date and BankVega Safety Rank.
The figure shows the distribution of failed banks of 2010 according to their BankVega safety ranking. As we can see, a safety rank of 2 or less is a definite indication of imminent financial distress. With 4 exceptions, every bank that failed in 2010 had safety ranking less than 10 and if we exclude another two (safety ranking 8), 126 of the 134 banks (94 %) had a safety ranking less than 5. This analysis demonstrates how prescient our safety ranking has been with respect to predicting bankruptcies.
Two Views on Banking Crisis As banks continue to fail, there is a renewed interest in understanding the causes of financial crisis. Economists have for long tried to understand what causes such crises. There are two views on this: (a) a “sunsopt” view, and (b) a “business cycle” view. The sunspot view argues that the root cause of crisis is depositor “panic”. When a substantial number of depositors of a bank begin to believe that a bank is not solvent, they end up starting a self-fulfilling bank run. Given the first-come first-serve nature of demand deposit contracts, every depositor wants to stand first in the line to withdraw his money from the bank. This collective action puts a pressure on even an otherwise solvent bank and drives it to bankruptcy. The business cycle based view instead focuses on fundamental weaknesses in the economy as the key force behind a banking crisis. Under this view, economists argue that banks fail because their illiquid risky investments turn out to be bad. Depositors realize this problem and therefore demand their money back. This leads to an “inefficient” liquidation of the bank and its ultimate failure. While these two views share several common feature, there are many differences in their policy prescriptions. Under the sunspot view, the regulator should try hard to avoid a self-fulfilling prophecy. Regulations such as deposit insurance from the government are geared precisely toward avoiding such runs. Under the business cycle based view, the regulators need to focus their attention more closely on avoiding risky bank behavior and in ensuring smooth liquidation of distressed bank’s assets. Of course, a prudent bank regulator should use elements of both these theories to design an optimal bank regulation policy.
Safety Ranking Safety ranking is a relative measure of bank’s risk. We rank all banks from 1 to 100 based on their chance of failure – 1 indicates the riskiest bank, whereas 100 indicates the safest. Our ranking is forward-looking. For example, a lower ranking in 2009Q2 indicates a higher chance of failure in the coming quarters 2009Q3 and Q4. We provide the safety ranking of each bank as well as the safety ranking of a carefully chosen set of peer banks. Peer banks are chosen based on their similarity to the given bank in terms of their size, business mix, and deposit mix. National peer safety ranking indicates the safety ranking of all banks in the nation that are classified as the peer bank. State peer indicates the same number for banks that are considered to be peer banks and are in the same state