How Biggest Bank Failures Shake the Worldwide Economy

The Complete List of Failed Banks Worldwide: What Went Wrong? 

Have you pondered why certain banks succeed and others fail? You deposit your hard-earned money into the bank every month, believing them to protect it. However, bank failures are rising worldwide. What happens behind the scenes to bring down these big institutions? 

This article analyzes all major bank collapses from 2020 and beyond to determine what went wrong. The reasons banks collapse are numerous and worrisome, from reckless investments to fraud to incompetence. After reading our extensive list, you may reconsider your bank. Most banks are safe, but you should still be cautious. Let's explore the list of failed banks worldwide.

Key Highlights

  • From 2000 to 2023, 565 banks failed; 465 (82%) occurred between 2008 and 2012. 2010 saw 157 bank failures, more than twice as many over the preceding ten years.

  • Even though governments have taken steps to stop significant bank collapses, European banks are still in danger of problems, including subpar lending, hazardous investments, and economic difficulties. 

  • Deutsche Bank has a high default risk and may need government aid if its recovery efforts fail. 

Are Bank Failures Common?

Although they used to be somewhat prevalent, bank failures have recently decreased in frequency.

Bank failures increased to dozens or hundreds after the Great Recession. The US saw fewer than five bank failures each year between 2015 and 2020, a substantial reduction.

Similar to this, bank crises were rare in the early 2000s. The average US bank failure between 2001 and 2007 was 3.57.

After the US recession in December 2007, things changed drastically. Bank failures rose to 93 per year between 2008 and 2012. From 2000 to 2023, 565 banks failed; 465 (82%) occurred between 2008 and 2012. 2010 saw 157 bank failures, which is more than twice as many as over the preceding ten years.

Miscalculations of risk cause many bank failures. For instance, there might be a significant exposure to the overpriced real estate market or, similar to Silicon Valley Bank, a significant exposure to US government bonds that saw a sharp increase in interest rates and consequent loss in value.

The List of Failed Banks Worldwide After 2020 

The banks in the US have been failing at an alarming rate since 2020. Here are some of the major banks that failed: 

Citizens Bank 

Citizens Bank collapsed on November 11, 2023. It couldn't recover from the losses during the 2020 recession. The bank accumulated bad debt as consumers defaulted on loans due to increased unemployment and company closures. Regulators had to close it after failing to raise emergency financing. 

Heartland Tri-State Bank 

Heartland Tri-State Bank collapsed on July 28, 2023. It invested heavily in oil and gas companies. When energy prices plunged in 2021, many of those companies went bankrupt - and the bank's assets were wiped out. Unable to remain solvent, Heartland Tri-State collapsed soon after. 

First Republic Bank, San Francisco

First Republic Bank collapsed on May 1, 2023. It focused on commercial real estate and luxury mortgages in affluent areas of California. But commercial tenants couldn't pay rent during lockdowns, high-end home sales dried up, and borrowers defaulted on loans. Hamstrung by massive losses in its loan portfolio, First Republic Bank couldn't continue operating, and regulators closed its doors. 

Signature Bank, New York 

Signature Bank collapsed on March 12, 2023. It had significant exposure to the hard-hit tourism, hospitality, and retail industries in New York City. Prolonged shutdowns and travel restrictions decimated many of its commercial clients, leaving the bank with a glut of non-performing. Despite efforts to raise emergency capital, Signature Bank eventually failed under the weight of its bad debt

Silicon Valley Bank 

Silicon Valley Bank collapsed on March 10, 2023. It offered banking services to several tech businesses that received venture capital funding. However, startup funding fell off dramatically during the crisis, and many fledgling businesses failed. As a result, Silicon Valley Bank suffered enormous losses. It could not continue operating, even after an unsuccessful attempt to locate a buyer. Regulators were forced to shut it down, ending its storied history of serving Silicon Valley. 

Banks Around the World That Have Collapsed 

Some banks collapsed despite massive bailouts after the 2008 financial crisis. Several prominent European and global banks have fallen since 2020. Here are some of the largest bank collapses and their causes: 

Almena State Bank 

Almena State Bank failed in October 2020. The bank had struggled with problem loans for years and needed help to raise new capital to stabilize its operations. The FDIC took over the bank and sold its deposits to Equity Bank. Long-standing problems with capital and asset quality caused the bank to collapse. It has been experiencing financial issues unrelated to the pandemic's economic effects.

First City Bank of Florida 

First City Bank of Florida collapsed in October 2020 due to losses from souring loans in its commercial real estate loan portfolio. The FDIC had United Fidelity Bank, FSB, take over the failing bank's deposits. Long-standing capital and asset issues collapsed the bank. Financial issues have plagued it since 2009. COVID-19 worsened the bank's economic situation, and it couldn't raise enough money to survive.

The First State Bank 

The First State Bank failed in April 2020. The bank suffered heavy losses from commercial real estate and construction loans that went bad. MVB Bank, Inc. acquired the failed bank's deposits. The bank has experienced capital and asset quality issues since 2015 and was in financial trouble. As of December 31, 2019, the bank's financial reports showed too little capital to comply with federal and state rules.

Ericson State Bank 

Ericson State Bank was closed by state regulators in February 2020. The small rural bank had high levels of bad loans and could not raise enough capital to continue operating. Farmers and Merchants Bank acquired Ericson State Bank's deposits. Significant losses on out-of-territory commercial loans and poor management that reduced the bank's capital caused bankruptcy.

Credit Suisse 

Recently, Credit Suisse has suffered scandals, legal challenges, and losses that have hurt its image and balance sheet. Its controversies and legal issues increased as it became a significant European financial organization. This drove Credit Suisse's shares down, prompting the Swiss central bank to rescue $54 billion to soothe investors. Credit Suisse failed after losing market and customer trust. 

Constant monitoring and prudent management are needed to maintain stability in the financial system. More transparent stress testing and policies for handling troubled banks could also help create a healthier banking sector. 

Which Banks Are at Risk of Failing Next? 

Recently, several large banks have fallen worldwide, and more may follow. Many US and European small and midsize banks are in trouble. 

Pacific Western Bank 

Pacific Western Bank in the US is viewed as being weakened and at high risk of collapse. It has a large proportion of uninsured deposits and may struggle if interest rates rise. The bank's financials show elevated levels of non-performing loans and charge-offs, indicating it is having trouble collecting on debts. 

Deutsche Bank (Germany) 

Deutsche Bank, a major European and German bank, has had several controversies, penalties, and losses. After restructuring last year to turn things around, the bank's stock price has plunged by over 90% from its peak. There are possibilities that the bank may collapse. Deutsche Bank has a high default risk and may need government aid if its recovery efforts fail. 

Monte dei Paschi di Siena (Italy) 

The Monte Dei Bank failed stress tests in 2016 and 2018 and needed government bailouts. The plan aims for profitability in 2023, but risks remain. The European Central Bank (ECB) issued a warning to MPS in October 2023, stating that failure to improve its financial situation would be inevitable. Since then, the bank has made public a fresh strategy to lower debt and raise capital. The bank is dealing with serious issues and could collapse in the future.

Banca Carige (Italy)

In 2019, Banca Carige failed an ECB stress test, showing it couldn't withstand economic troubles. FITD announced in March 2023 that it will sell Banca Carige to BPER Banca. Early in 2024, the transaction should be completed. If approved, the merger will eliminate Banca Carige's autonomy. Banca Carige may fail if this happens. Bank capitalization is low, and non-performing loans are high. It also faces legal issues. 

NordLB (Germany) 

Lower Saxony's state-backed Landesbank struggled with bad shipping loans and failed an ECB stress test. Shareholders injected €3.6 billion to recapitalize it. The ECB issued a warning to NordLB in October 2023, stating that failure to improve its finances would be inevitable. Since then, the bank has made public a fresh strategy to lower debt and raise capital. The bank is dealing with serious issues and could collapse in the future.

UniCredit (Italy) 

UniCredit, Italy's largest bank, has billions of euros of bad loans on its books and has struggled to consolidate after numerous acquisitions. The bank is selling off assets and restructuring its balance sheet. Still, weak economic growth in Italy poses risks for the bank going forward.

The Bottom Line

Here's a comprehensive list of failed banks in the USA & a list of failed banks in Europe. Banks collapse for numerous reasons, from poor management to hazardous investments to fraud. Before depositing or borrowing money, check the bank's financial health. Your hard-earned money depends. 

Bank failures are never desirable, yet most US and European accounts are insured for $250,000 and €100,000. However, bank collapses typically cause job losses, economic instability, and system distrust. Best wishes for fewer failures and a stronger, more transparent global banking system. Make sure your hard-earned money is safe!

FAQs

How does a bank fail?

Bank failure occurs when it cannot pay its creditors and depositors. There might be several causes, including dishonest behavior, a poor management group, or a downturn in the economy.

Why are there bank failures?

There are several reasons banks collapse. Common reasons include:

  • High NPLs: Unrepayable loans. A bank with large NPLs may lose money.

  • Low bank capital: Capital is money set aside to absorb losses. A bank with minimal capital is likelier to fail if it loses money.

  • Mismanagement: Poor management can cause fraud and excessive risk-taking.

  • Economic recession: Recessions reduce credit demand and raise bad debts. Banks may struggle to stay profitable.

What happens to depositors when a bank fails?

Deposit insurance plans provide protection for depositors in the majority of countries. This means that if a bank collapses, depositors typically receive a certain amount. In the US, insured banks guarantee depositors up to $250,000.

How can I secure my money against bank failure?

Bank collapse risk can be reduced in numerous ways:

  • When picking a bank, seek one with adequate capital. This helps the bank cope with losses.

  • If you have a lot of savings, disperse your deposits over numerous institutions. This reduces your risk if a bank collapses.

  • Consider a credit union: Member-owned credit unions are like banks. Credit unions are more stable and less likely to fail than banks.

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Douglas Allan 26 Nov, 2023

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