Friday, November 11, 2011

This Week in Bank Failures

European leaders have begun talking quietly about breaking up the euro. The big winner in that scenario would be the larger banks — those that survived the initial turmoil, that is. Banks would gain about $2 billion per day in fees for currency exchanges that don’t have to be done in the euro zone. Wall Street would stand to gain an additional $1 billion per day in currency trading by manipulating exchange rates.

Those keeping score on Bank Transfer Day, a week ago tomorrow, say it was a big event, with a quarter of a million U.S. customers setting up checking accounts at new banks and credit unions. The amount of money moved on Saturday was only a few billion dollars, but partly that is because many participants were more focused on opening the new accounts than on closing their old accounts. Consumers wanting to minimize the frictional costs of moving their banking will continue to write checks on the old checking account until its balance dwindles, while doing all other banking at the new bank.

One small bank failed in Georgia. Community Bank of Rockmart‘s single location will carry on as a branch of Century Bank of Georgia, which is assuming the deposits and purchasing two thirds of the assets. The failed bank’s emphasis on commercial real estate was its undoing, according to regulators. It also suffered from inauspicious timing. It launched in May 2005 and opened its permanent location in March 2006, just at the time when the Georgia economy and real estate market were coming apart.

The bank closing occurred last night, not on the usual Friday night, because of the holiday today.