US based Netbank becomes "Nyet"Bank

Netbank was one of the earliest internet only banks, launched in the 1990s in the US, but soon found itself with lots of competitors as bricks and mortar banks launched their own services.

Well, it has become the latest casualty of the credit crunch and the FDIC in the US has closed the bank, after it was hit with high mortgage default rates.

In the USA, the FDIC insures bank accounts up to $100,000. Unfortunately, depositors had no warning that the bank was to close or even that it was in trouble, as was the case with Northern Rock where depositors took no chances. The consequence was that more than a few people had more than $100,000 in their accounts. Apparently the total excess was $109 million in accounts and these depositors now rank as unsecured creditors who will have to get in line with everyone else.

All of the insured accounts are going to be transferred to ING.

Similar to Northern Rock, the internet service is the first and fastest service to have the shutters drawn when the bank hits trouble, leaving customers with no where to turn to.

posted by John Wilson @ 9:44 AM Permanent Link newsvine reddit



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