ALBAWABA- Banks, like any other business, are not immune to failure. Indeed, history has shown that some of the biggest bank failures in modern history have had significant and long-term economic consequences.
The banking business is a vital component of the global economy. Banks are in charge of a wide variety of financial services, such as loans, savings accounts, and investment opportunities. In this article, we will take a look at the 10 largest bank failures in modern history.
10 Largest bank failures in modern history
- Lehman Brothers
The collapse of Lehman Brothers in 2008 is widely considered to be the largest bank failure in modern history. The investment bank's collapse triggered the global financial crisis and led to the loss of over 25,000 jobs. Lehman Brothers had over $600 billion in assets at the time of its collapse.
- Washington Mutual
Washington Mutual was once the largest savings and loan association in the United States. However, in 2008, it became the largest bank failure in US history, with over $300 billion in assets. The bank's collapse led to the loss of over 10,000 jobs and had a significant impact on the US economy.
On March 10, 2023, Silicon Valley Bank was taken over due to a sudden surge of withdrawals from its depositors. This caused significant disruption in the markets due to the extent of the bank's collapse. With assets that mount to $209 billion, the tech industry experienced significant growth during the pandemic, resulting in a large influx of deposits from Silicon Valley Bank's clients. This increased the bank's total deposits from $60 billion at the end of the first quarter of 2020 to nearly $200 billion two years later. While this was happening, the bank invested in U.S. Treasuries and mortgage-backed securities, but when the Federal Reserve began to raise interest rates to combat inflation, the value of these investments declined. This had a negative impact on SVB's clients as well: with startup funding becoming more expensive, private fundraising became more difficult, prompting some clients to withdraw their funds. During the surge in withdrawals, SVB sold some of its assets, including bonds that had decreased in value due to the increase in interest rates, resulting in losses amounting to $1.8 billion.
- Signature Bank
As a result of the surge of withdrawals, Signature Bank experienced the third-largest bank failure in the history of the United States. To safeguard the bank's depositors and maintain the stability of the financial system in the country, regulators announced on Sunday that they would be taking over the bank. This sudden development came as a shock to Signature Bank's executives, who are deeply involved in the real estate and legal industries in New York. The bank had 40 branches, assets worth $110.36 billion, and deposits totaling $88.59 billion as per regulatory filings at the end of 2022, according to board member and former U.S. Rep. Barney Frank.
IndyMac was a US-based mortgage lender that failed in 2008, with over $30 billion in assets. The bank's collapse led to the loss of over 7,000 jobs and was one of the first major bank failures during the global financial crisis.
- Bank of United States
The Bank of the United States was a New York-based bank that failed during the Great Depression. The bank had over $200 million in deposits and was the largest bank failure in US history at the time.
- Continental Illinois National Bank and Trust Company
Continental Illinois National Bank and Trust Company was one of the largest banks in the United States in the 1980s. However, in 1984, the bank's collapse led to a bailout by the Federal Deposit Insurance Corporation (FDIC). The bank's failure was due to risky loans and investments.
- Banco Ambrosiano
Banco Ambrosiano was an Italian bank that collapsed in 1982 due to fraudulent activity. The bank had connections to the Vatican and its collapse had far-reaching political implications.
- Barings Bank
Barings Bank was a British bank that failed in 1995 due to rogue trader Nick Leeson. The bank's collapse led to the loss of over 1,000 jobs and had significant implications for the global financial industry.
- Northern Rock
Northern Rock was a UK-based bank that failed in 2007 due to its heavy reliance on short-term borrowing to finance long-term lending. The bank's collapse led to the loss of over 2,000 jobs and had significant implications for the UK economy.
In conclusion, the banking industry is not immune to failure, and history has shown that some of the largest bank failures in modern history have had significant and long-lasting impacts on the economy. From the collapse of Lehman Brothers to the failure of Signature Bank, these bank failures serve as a reminder of the importance of sound financial practices and the need for regulatory oversight.