US Banks

The United States has a unique banking system that allows just about anyone to open a bank if they meet certain regulatory conditions set by the Federal Deposit Insurance Corporation. The result has been a plethora of banks of all different sizes across the country.

Prior to the financial crisis in 2009, about 100 new banks opened in the USA every year.  Since 2010, only 3 new banks have opened in the USA.  This is unprecedented.

In the five years prior to 2008, 10 banks failed in the USA.  Between January of 2008 and the end of 2012, a total of 465 US banks failed.  Since the start of 2013 a further 23 have failed, including 6 so far this year.

What seems clear is that, for the US banking system the 2008-2009 recession did not really end until at least the end of 2012.  Even now, the US banking system may be exceptionally fragile.

The recovery in real estate prices in the USA over the past few years has no doubt rendered literally thousands of US banks technically solvent again, as the mortgages on their books are now theoretically sound.  But this price recovery has only been possible with the lowest interest rates in history.

Can the remaining US banks survive a rise in interest rates and a possible corresponding drop in real estate prices, which is probably the real litmus test for both the real health of those banks and of the US economy as a whole?  With most analysts predicting the first rise in rates in 8 years this September, we may soon find out.