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When the FDIC released its Quarterly Banking Profile for
the fourth quarter 2010, it included a statement from
FDIC Chairman Sheila Bair that the agency believes "the number of failures
peaked in 2010." However, at least through the end of February 2011, the
evidence was to the contrary, as the number of bank failures during the first
two months of 2011 (23), exceed the number through the end of February 2010
However, since the end of February 2011, the number of
bank failures has declined sharply. The FDIC closed only three banks during
March 2011, and only one since March 11, 2011. As of April 1, 2011, there have
been a total
of 26 bank failures this year. By the same point in 2010, there had been a
total of 41 failed banks.
The difference between the two year-to-date tallies is
that during March 2010, the FDIC took control of 19 banks, compared to only
three in March 2011. In addition, the first Friday in April 2011 also passed
without any additional bank failures.
The 26 bank failures through the end of March would if
annualized project to about 104 bank failures by year end 2001, which would be
the lowest annual number of bank failures since 2008 (when there were 25). But
if the bank failure pace that prevailed in March 2011 were to continue, the
number of bank failures by year end could be well below that projected number.
One of the signs that will be interesting to watch is the
number of problem institutions reported when the FDIC releases its next
Quarterly Banking Profile for the quarter ended March 31, 2011. The Profile is
due to be issued sometime later in May. The number of problem institutions has
been increasing every quarter for several years now, although the rate of
increase has slowed. In its last profile, the FDIC stated that 2010 was a "turnaround" year for the banking industry.
If last year truly was a turnaround year, the reported number of problem
institutions should finally start to decline -- which, if it were to happen,
would tend to support the probability that the slower rate of bank failures
could well continue as the year progresses.
With the 23 bank failures so far this year, the total
number of bank failures since January 1, 2008 stands at 348. Even with this
significant number of failed institutions and the amount of time that has
passed since the beginning of the current bank failure wave, the FDIC has so
far filed lawsuits against the directors and officers of only six failed banks.
to access a list of the FDIC lawsuits.)
On its website, the FDIC reports
that as of March 15, 2011, it has authorized lawsuits against a total of 158
individuals. However, the six FDIC lawsuits so far collectively include only
about 43 individual defendants, which suggest that there are a number of
additional lawsuits being readied and likely to be filed in the near future. In
addition, the number of individuals against whom lawsuits have been authorized
has grown over recent months to its current level of 158, and since banks have
continued to fail in the interim, it seems likely that the authorized number
will continue to grow, which would imply an even greater number of lawsuits yet
The number of lawsuits that ultimately will be filed
remains to be seen. But while that part of the story unfolds, it is noteworthy
that for the first time in quite a while, the story appears to be that the
number of bank failures is declining. And that sure seems like a good thing to
other items of interest from the world of directors & officers liability,
with occasional commentary, at the D&O Diary, a blog by Kevin LaCroix.
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