If Greece is delayed in making payments on its foreign debt, it won’t affect Greece much, but the liquidity of some of the foreign creditors could be significantly affected. That probably includes some of the largest banks in New York, but no one seems to know exactly which ones.
To no one’s surprise, the civil action filed against Goldman Sachs has been followed by a criminal investigation. The investigation will surely run for at least a couple of years.
There were reports of mysterious bankers hanging around San Juan all week, and tonight, several Puerto Rico banks were seized by regulators. The largest of these was the largest bank failure so far this year. Westernbank Puerto Rico had $8.6 billion in deposits and nearly $12 billion in assets.
Banco Popular, the largest Puerto Rico bank, is taking over the deposits and is purchasing 79 percent of the assets. Banco Popular has been facing losses of its own, but is in a much stronger capital position.
Puerto Rico has been in a recession since 2006, and high unemployment and a lack of economic growth are at the root of the problems banks are having there.
Two other banks were closed in Puerto Rico. These were midsized banks that, combined, were about the same size as Westernbank Puerto Rico. R-G Premier Bank of Puerto Rico had $4.3 billion in deposits and $5.6 billion in assets. Eurobank had $2 billion in deposits and $2.6 billion in assets. All three banks were closed by Puerto Rico banking regulators.
Scotiabank de Puerto Rico is taking over the deposits and purchasing the assets of R-G Premier Bank of Puerto Rico. Scotiabank de Puerto Rico is the local subsidiary of Scotiabank, which is based in Canada but has a strong presence in the Caribbean dating back to 1889. Scotiabank de Puerto Rico was not as large as R-G Premier Bank of Puerto Rico, but Scotiabank as a whole is a large bank operating in 50 countries.
Locally based bank Oriental Bank and Trust is taking over the deposits and purchasing the assets of Eurobank.
The three Puerto Rico bank failures are estimated to cost the FDIC $5.3 billion.
On the mainland, there were bank failures in Washington, Michigan, and Missouri. In Washington, state banking regulators closed Frontier Bank, a move that had been anticipated for some time. The bank had $3.1 billion in deposits and 51 locations concentrated on the West Coast.
The turmoil surrounding the bank included the abrupt resignation of its president at the end of last month, supposedly following a dispute about his vacation schedule. The head of California operations was promoted to president, though as of last week, he was still working in California and had not yet made a trip to headquarters. Also last month, the FDIC issued a prompt corrective action order against the bank. This week, the bank was forced to deny a rumor of a buyout, which was based on an Internet message claiming an investment group had collected $135 million to buy the bank and another bank. The message was hard to take seriously, as a buyer for Frontier Bank would seemingly need more than $1 billion, but the subsequent rumors may have driven the bank’s stock up by more than 100 percent. That degree of volatility, though, is not unexpected in a stock that has declined 99 percent from its peak.
San Francisco-based Union Bank is taking over the deposits and purchasing the assets.
Bank regulators in Michigan closed Citizens First Savings Bank, which had 22 locations in the eastern part of the state, and $1.4 billion in deposits. First Michigan Bank is taking over the deposits and purchasing half of the assets.
Citizens First was several quarters late with its financial statements, and had been cut off by Freddie Mac two weeks ago. Freddie Mac said it would no longer guarantee the bank’s mortgage loans, citing accounting failures as one of several reasons.
Two small banks in Missouri were closed.
- Champion Bank, with $154 million in deposits and one location in Creve Coeur, Missouri. BankLiberty is taking over the deposits and purchasing most of the assets.
- BC National Banks, with $55 million in deposits and four locations near the Kansas state line. Local bank Community First Bank is taking over the deposits and purchasing the assets.
The cost to the FDIC for the four mainland bank closings is estimated at $1 billion.
Last weekend, the NCUA placed a credit union in conservatorship. St. Paul Croatian Federal Credit Union serves 5,000 members in northeastern Ohio. The credit union continues to operate under NCUA management.