Friday, April 19, 2013

This Week in Bank Failures

Gold had its most abrupt price decline ever on Monday, and no one seems to know why. The timing could point to an urgent liquidation of national or bank gold holdings in Europe. Analysts are looking at Cyprus as a possible seller of gold, but while Cyprus is debating the merits of selling some of its gold holdings, there is no indication that it has done so.

People in Cyprus can start to catch up on their rent payments, with new rules that allow a larger but still modest amount of money to be transferred between banks in Cyprus. Capital restrictions on Cyprus bank accounts have forced people there to do many routine transactions in cash.

In Spain, even if a top Santander executive is eventually removed from his post because of his criminal past, a new banking ethics law passed last Friday buys him a little time. Administrative proceedings against him had to be scrapped, and new hearings can’t take place until regulators at Bank of Spain have had a chance to look over the new law.

The IMF criticized the United Kingdom’s austerity program this week, saying it was putting the country’s economy unnecessarily at risk. Separately, Fitch downgraded the U.K. this week, also citing the tax revenue shortfalls caused by austerity budgets.

It was the first mass bank closing weekend of the year in the United States. State regulators in Florida closed two banks, Heritage Bank of North Florida in Orange Park and Ponte Vedra Beach, and Chipola Community Bank in Marianna. In-state banks are assuming the deposits and purchasing the assets. In Kentucky, the OCC closed First Federal Bank, with five locations in Lexington. Indiana-based Your Community Bank is assuming the deposits and purchasing the assets, excluding foreclosed real estate. It is an eastward expansion for Your Community Bank, which already had a presence in Kentucky. Combined, these three failed banks had $250 million in deposits.

Two state bank associations have sued Treasury over new regulations that require information reporting on interest paid to people in foreign countries. Similar reports have long been required to cover interest payments to U.S. residents. The complaint suggests that foreigners place deposits in U.S. banks to dodge income taxes, and these customers may have already withdrawn more than a billion dollars because of the more stringent reporting requirements. The bankers say the government should have taken this loss of business into account when drawing up its regulations and are seeking to have the rules overturned.