Mar 16, 2023By: Bhakti Makwana
The collapse of Silicon Valley Bank (SVB) and Signature Bank in the US has raised concerns about the financial stability of the banking sector amid rate hike cycles by central banks. Such banking disasters, however, aren't new. Here are the top 10 bank failures in the US and the damage they caused.
During the 2008 global financial crisis, the largest bank failure to occur due to the subprime loans mess was that of Washington Mutual Bank. It had assets of about $307 billion. The bank was eventually taken over and sold to JPMorgan Chase for $1.9 billion.
The collapse of California-based startup-focused Silicon Valley Bank on March 10, 2023 became the second largest bank failure in the history of the US. The bank had assets of $209 billion. SVB had ploughed billions into US government bonds during the era of near-zero interest rates but as the US Fed raised rates over the last year, the bank got into trouble.
Right after SVB bank went down, the New York-based lender – which had assets of $110 billion – was shut down by the regulators on March 12, 2023. The regulators said the bank was being taken over to protect its depositors and the stability of the US financial system after there was a rush by customers to check on their deposits following the SVB crisis. Signature Bank was a big lender to the crypto industry.
In 1984, the bank that had assets of $40 billion was the largest bank failure in history at that time. The bank had become insolvent in part due to bad loans purchased from the failed Penn Square Bank N.A. of Oklahoma. This caused a substantial run on the bank's deposits with large depositors withdrawing over $10 billion in early May 1984.
The Texas-based bank with assets of $32.5 billion failed in 1988 during the savings and loan crisis, when the bank was hit hard by real estate devaluation. As a result of a series of mergers over the next two decades, most of what was once First Republic is now part of Bank of America.
The bank was one of the largest mortgage lenders to fail during the housing crisis. It went bankrupt on July 11, 2008, and had assets of $32 billion. The lender was offering loans to people who had good credit scores but couldn't prove a reliable stream of income, for example the self-employed.
The California-based bank failed in September 1988, during the savings and loan crisis. It had assets of about $30 billion. The bank had large holdings of mortgage-backed securities. which were subject to price volatility as interest rates changed. A $468 million loss in 1987 left the bank technically insolvent.
On August 14, 2009, the bank failed and its 346 branches were seized by the regulators. It had assets of $25 billion. The bank ran into problems in the late 2000s after it was revealed that it had bought over $1 billion in mortgages from Taylor, Bean & Whitaker. The bank's failure was the largest bank failure in 2009 and the sixth-largest bank ever to fail in the US.
The bank, which had assets of about $22 billion, failed in 1991 because of heavy losses in its loan portfolio. As of 2016, most of what was once Bank of New England is now part of Bank of America.