Latest big bank to shut down hits US
US BANK Colonial BancGroup, which has assets of $25bn (£15.1bn), became the largest American bank to fail so far this year when it was shut down by federal officials on Friday.
On the same day, regulators also shut down two institutions in Arizona – one in Las Vegas and one in Pittsburgh – pushing the total number of failed US banks for 2009 to 77.
The Federal Deposit Insurance Corporation (FDIC), which was appointed receiver to the bank, has approved the sale of Colonial’s $20bn of deposits, and around $22bn of its assets, to the US’s 10th largest financial holding company, BB&T.
The FDIC will dispose of the remainder of Colonial’s assets at a later date, it said. The regulator said it had signed a loss-sharing agreement with BB&T on around $15bn of assets.
The collapse will cost the FDIC’s deposit insurance fund around $2.8bn. After the takeover, BB&T will be America’s ninth-biggest bank by assets,
Colonial warned last month it substantially doubted it would be able to survive. And earlier this month it said there was a criminal probe into part of its mortgage-lending business.
Colonial is the sixth biggest US bank to fail.
The downturn has seen a spurt in the collapse of financial institutions, with regulators shutting down banks at their fastest pace in 17 years, according to the FDIC.
Last September during the height of the world financial meltdown, Seattle-based Washington Mutual – WaMu – was seized; it was the biggest bank failure in US history. Branches and assets of the group were later sold off to rival JPMorgan Chase.