Bank Failures Forecast to Increase This Year

Has anyone seen the latest press releases from the FDIC on bank failures on July 2nd?

If you haven't seen it yet, you can catch it here. Calculated Risk also has a nice announcement on it as well. Those who have read previous posts of mine know that I like to do time series forecasting of future financial events. Well, bank failures are no different.

I actually created this forecast back in May using ARIMA. We can see that the forecast of 28 bank failures came in pretty close to the actual number of 24 for Q2. However, what is really disturbing is that we already have 7 new bank failures in the first 3 days of Q3. I'm predicting that we will have around 35 failures this quarter although at this rate, the actual number of failures may actually exceed forecast. I'm looking for around 125 failures for this year in total with another 230 banks going under next year. While this is a small number compared to the 8300 institutions chartered by the FDIC, the numbers are astronomically large when compared to the relative lack of failures in years past (usually much less than 10 in any given year from 2000 to 2007 with the exception of 2002 which had 11 failures).

If you are a U.S. based banking consumer, my recommendation is to keep your money under the FDIC insurance limit of $250K per individual in any one bank This number is different if you have a joint account with a spouse. You can check out the amount of insurance coverage you have by going here. Anyhow, be vigilant and your money should be safe.

Disclosure: no positions

Comments

[Roger Knights:]

If the economy and housing prices weaken significantly, the bank failure rate might "go parabolic" -- or at least curve upward well above the projection lines.

Jul 05 08:12 AM

[swaps:]

Both Bob Chapman and Harry Schultz are warning that there could be a national bank holiday by early September. Isn't that about the time that unemployment benefits run out for the waves of consumers who were laid off last November and December?
I would shirk this dire warning off except that on the street last week I heard that local police in this small southeastern Colorado community expect to be federalized soon.
Then I heard yesterday that guards at the two prisons in this county - one private and one state - are being deputized. Deputized for what?
A bank holiday would clearly put a death stake in the heart of the broader non financial businesses that are trying to limp along while the major money center banks pretend they are not insolvent.
Schultz is warning that the holiday is part of an overall plan by the international banksters to create a scenario for introducing a global currency and forcing hapless consumers to accept it. Schultz says the IMF will be the issuer. Of course, a global currency will then require a global banking slave control mechanism with super powers and no accountability. It will also be far too big to manage.
But the banksters don't know that yet. They are just working the plan, always the plan.

Jul 05 11:01 AM

[Badgolfer:]

Good work,Mr. Cassill.
One thing that may be overlooked are the number of branches closed.If,for instance,SNV and Regions fail in 2010,they are only two banks but hundreds of branches.The community effect is far above "two banks".Would love to see your report done in number of branches.This would better indicate economic effect.
CW

Jul 05 11:22 AM

[Freedom Thi...:]

Like Badgolfer I wonder what this affect will be on the overall economy. Is main street insulated? FDIC yes but let's say 400-500 banks fail how many go unemployed and what is this affect on other industries? Have the right sized enough to continue with this apparently new paradigm of spending and unemployment? This is great stuff but it raises more questions then it answers in my mind. None the less thanks for a great analysis.

Oct 07 10:19 AM