Why are so many banks failing?
In 2023, America saw its highest amount of bank closings since the 2008 recession. The increase in mobile banking use, inflation and interest rates, and real-estate struggles all contributed to why 2023 experienced so many banks shutting their doors.
A run on deposits (leaving the bank without the cash to pay customer withdrawals). Too many bad loans/assets that fall sharply in value (eroding the bank's capital reserves). A mismatch between what the bank can earn on its assets (primarily loans) and what it has to pay on its liabilities (primarily deposits).
1. Flawed Bank Analysis. Banks fail because of poor risk management, broader economic conditions, mismatch between assets and liabilities, fraud, and inadequate supervision. However, there should be a defined metric to evaluate a bank's safety.
Bank NameBank | CityCity | Closing DateClosing |
---|---|---|
First Republic Bank | San Francisco | May 1, 2023 |
Signature Bank | New York | March 12, 2023 |
Silicon Valley Bank | Santa Clara | March 10, 2023 |
Almena State Bank | Almena | October 23, 2020 |
If your bank fails, up to $250,000 of deposited money (per person, per account ownership type) is protected by the FDIC. When banks fail, the most common outcome is that another bank takes over the assets and your accounts are simply transferred over. If not, the FDIC will pay you out.
Loss of Savings: If banks were to fail, people would lose their savings, including deposits, investments, and retirement funds. This could lead to a loss of confidence in the financial system, and people may become hesitan.
Generally speaking, credit unions are safer than banks in a collapse. This is because credit unions use fewer risks, serving individuals and small businesses rather than large investors, like a bank.
2024 in Brief
There are no bank failures in 2024. See detailed descriptions below. For more bank failure information on a specific year, select a date from the drop down menu to the right or select a month within the graph.
Recently, a report posted on the Social Science Research Network found that 186 banks in the United States are at risk of failure or collapse due to rising interest rates and a high proportion of uninsured deposits.
Bank Name | City | Acquiring Institution |
---|---|---|
Heartland Tri-State Bank | Elkhart | Dream First Bank, N.A. |
First Republic Bank | San Francisco | JPMorgan Chase Bank, N.A. |
Signature Bank | New York | Flagstar Bank, N.A. |
Silicon Valley Bank | Santa Clara | First–Citizens Bank & Trust Company |
Who is the number 1 bank in America?
JPMorgan Chase, the financial institution that owns Chase Bank, topped our experts' list because it's designated as the world's most systemically important bank on the 2023 G-SIB list. This designation means it has the highest loss absorbency requirements of any bank, providing more protection against financial crisis.
Where to put money during a recession. Putting money in savings accounts, money market accounts, and CDs keeps your money safe in an FDIC-insured bank account (or NCUA-insured credit union account). Alternatively, invest in the stock market with a broker. Let's go over each of these options.
Generally, money kept in a bank account is safe—even during a recession. However, depending on factors such as your balance amount and the type of account, your money might not be completely protected. For instance, Silicon Valley Bank likely had billions of dollars in uninsured deposits at the time of its collapse.
If the bank fails, you'll get your money back. Nearly all banks are FDIC insured. You can look for the FDIC logo at bank teller windows or on the entrance to your bank branch. Credit unions are insured by the National Credit Union Administration.
If your deposits are within the FDIC insurance limits of $250,000 per person, per account, you won't lose any money if your bank closes. But if you exceed these limits, the failed bank's estate is responsible for the remaining amount, and you might have to file a claim to get the rest.
Still, the FDIC itself doesn't have unlimited money. If enough banks flounder at once, it could deplete the fund that backstops deposits. However, experts say even in that event, bank patrons shouldn't worry about losing their FDIC-insured money.
Bank name | Bank failure date | Assets* |
---|---|---|
Washington Mutual Bank | Sept. 25, 2008 | $307 billion |
First Republic Bank | May 1, 2023 | $212 billion** |
Silicon Valley Bank | March 10, 2023 | $209 billion** |
Signature Bank | March 12, 2023 | $110 billion** |
By law, after insured depositors are paid, uninsured depositors are paid next, followed by general creditors and then stockholders.
For decades, bankers have objected to the tax breaks and sponsor subsidies enjoyed by credit unions and not available to banks. Because such challenges haven't slowed down the growth of credit unions, banks continue to look for other reasons to allege unfair competition.
What happens to credit unions if banks collapse?
If the bank fails, you'll get your money back. Nearly all banks are FDIC insured. You can look for the FDIC logo at bank teller windows or on the entrance to your bank branch. Credit unions are insured by the National Credit Union Administration.
Limited accessibility. Credit unions tend to have fewer branches than traditional banks. A credit union may not be close to where you live or work, which could be a problem unless your credit union is part of a shared branch network and/or a large ATM network such as Allpoint or MoneyPass.
Date of Bank Failure | Date of Next Bank Failure | Number of days |
---|---|---|
Dec. 15, 2017 (Washington Federal Bank for Savings) | May 31, 2019 (The Enloe State Bank) | 532 |
Oct. 23, 2020 (Almena State Bank) | March 10, 2023 (Silicon Valley Bank) | 868 |
On January 24, the Federal Reserve announced that the BTFP, launched in response to the Silicon Valley Bank and Signature Bank failures of March 2023, will cease making new loans on March 11.
Quantitative tightening. That second change relates to the quantitative easing (QE) programme by the Fed and other central banks, which broadly dates from the global financial crisis of 2007-09.
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