Bank Failures Fall to Seven Year Low

During the financial crisis the number of banking failures swelled to a peak failure year during 2010 when a total of 157 banking institutions failed. The number of bank failures has declined every year since then and the number of banks failures during 2014 has reached a seven year low.

Is the current low number of banking failures a bullish forecast for the economy and the banking industry?  The answer is probably no judging by past results.  Who would have predicted an imminent banking collapse during 2005 and 2006 when there were zero banking failures?

We have seen multiple financial crises and stock market crashes over the past two decades all of which occurred suddenly with little warning.  Since the global financial system has become ever more complex and leveraged after every financial crisis, the future will probable bring more volatility and “black swan” events.

As can be seen below, prior to 2009 banking failures were a rare event with only a handful of banks failing in any one year.

Since 2000 a total of 535 banks failed, part of the reason for the large decline in the number of banking institutions over the past 15 years.