US regulators expect more bank failures

July 30, 2008
US regulators expect more bank failures
Seven banks shut so far this year, 2 this past weekend

(WASHINGTON) US bank regulators said they expect more lenders to fail
this year as the pace of shutdowns returns to more typical levels.
Regulators have closed seven banks so far this year, including two
this past weekend.

'We're in a period where we can expect an increase in bank failures,'
Comptroller of the Currency John Dugan said on Monday in a Washington
interview. 'We went through a period of four years without having any
bank failures, so this is more of a return to more normal, average
types of periods of bank failures.' Banks are overwhelmingly 'safe
and sound and well-capitalised,' Sheila Bair, chairman of the Federal
Deposit Insurance Corp, said on Monday in an interview.

US regulators shuttered First National Bank of Nevada and California-
based First Heritage Bank on July 25 after concluding both were
undercapitalised. The banks were the sixth and seventh to close this
year as the financial-services industry grapples with failed loans
stemming from the worst housing slump since the Depression.

The FDIC has closed 35 banks since late 2000.

Regulators closed IndyMac Bancorp Inc, a Pasadena, California-based
mortgage lender, on July 11 following a run on deposits, the third-
largest seizure of a financial company.

'There's a very remote chance anybody's bank is going to fail, but if
it does, their insured deposits are absolutely safe,' Ms Bair said.

The FDIC has closed a total of 35 banks since October 2000, according
to a list at fdic.gov. The US shut 12 banks in 2002, the highest in
the period, and 2005 and 2006 had no closures.

Mr Dugan, whose Washington-based agency regulates national banks,
said the closures of First Heritage in Newport Beach and First
National in Reno were 'smoothly executed', with depositors having
access to their funds over the weekend.

Mutual of Omaha Bank, based in Omaha, Nebraska, assumed all deposits
of both banks and on Monday reopened their 28 offices as its own
branches.