There was one more bank closure in US this week, taking the total to 109 banks this year to date, and at the current speed , we can expect to see at least 150 bank closures in the full year 2010. And it is indeed difficult for people to understand as to why more banks are failing in US in the last two years :
The key reason for the US bank failures in the last two years is the high rate of default in loan repayments by both individuals and also corporates. There are hundreds and thousands of small and medium sized business units who have downed the shutters and have wholesomely defaulted on their repayments to banks.
The unemployment rate is ruling very high and there are no signs of improvement in the job scenario in the coming months. That only means that more people would start defaulting bank repayments in the coming months, and therefore it may be wise to expect further bank failures till the end of the year.
But one good thing that is happening in the last few months is that new job losses are almost nil, and more and more people are getting into savings mode. So the bank funds are rising and there could be healthier banking system growth in the year 2011 and 2012 . That is of course subject to recession not hitting back the US.