From The Sunday Times
August 16, 2009

$25bn Colonial Bank closed down by US regulators

Dominic O’Connell and Marta Szczerba
Comment 1
Recommend 3

One of the biggest banks in Florida has been shut down by regulators and its assets sold to a rival in a move that underlines the continued frailty of the American banking and property sectors.

Colonial Bank, which was based in Alabama but had flourished in the central Florida property boom, had $25 billion (£15 billion) in assets.

It is the largest American bank to fail since Washington Mutual collapsed at the height of the credit crunch last September, and the fifth-largest American bank failure ever, according to analysts.

Colonial was shut down on Friday by the Federal Deposit Insurance Corporation (FDIC), the government agency that provides a safety net for the customers when banks get into difficulties.

Related Links
Dash for cash ends in trash
Scholar goes online to differ with Obama
The FDIC said Colonial’s 346 branches, which are spread across five states, and most of its assets had been transferred to one of its rivals, BB&T. The switch will make BB&T, based in North Carolina, America’s eighth-biggest bank.

The FDIC revealed that it was expecting to take a hit of about $2.8 billion in making good Colonial’s losses. The agency has struck a deal that will see it share part of the losses if the loan books it has sold to BB&T turn bad.

Colonial was set up in 1981 with funds of $160m and grew quickly, buying 25 banks in Florida between 1996 and 2007. It was a big player in real estate loans, in particular through its “mortage warehouseâ€