17 Aug 2009

US Colonial Bank fails - largest collapse in 2009

9:27 am on 17 August 2009

Colonial Bank has become the largest United States bank to fail this year.

Colonial's total assets at the end of June were $US25 billion and its total deposits were about $US20 billion.

The bulk of its assets have been sold to rival bank BB&T.

Colonial is the 74th institution underwritten by the government banking insurer - the Federal Deposit Insurance Corporation - to fail in the US so far this year.

The agency said it had entered into a loss-sharing agreement with BB&T on about $US15 billion of Colonial's assets, which the federal government said would minimise the cost to taxpayers.

The BBC reports that the terms of the deal mean none of the bank's depositers will lose their funds and BB&T will take over the operation of Colonial's 346 branches.

But despite the apparently smooth transition, the BBC says some industry analysts believe that at least 100 more US banks could suffer a similar fate to Colonial's in the coming months. They say that could slow the recovery of the US economy.