WASHINGTON - New York regulators shut down $89 million-asset Golden City Commercial Bank on Friday, the seventh time this year a bank has failed and the third recent meltdown in which fraud is said to have played a role.

State regulators closed Golden City because it operated in an unsafe manner, defied their orders, and broke banking laws, causing "a complete loss of confidence," a New York State Banking Department press release said.

The 13-year-old bank was closed before it could become insolvent, and the Federal Deposit Insurance Corp. said its cleanup would not cost the Bank Insurance Fund a penny.

Golden City's closure follows the well-publicized failures of Boulder, Colo.-based BestBank in 1998 and First National Bank of Keystone (W.Va.) in September. Officers at both banks are accused of massive frauds that resulted in unusually high costs to the insurance funds.

Less than two weeks ago the Manhattan District Attorney's office indicted the bank's former majority shareholder, Jack Liu, and its chairwoman, Martha Chu, on multiple counts of fraud. The two were accused of helping others obtain loans from the bank and then taking kickbacks. Mr. Liu did not appear in court and remains a fugitive.

State and FDIC examiners said they knew of questionable activities at Golden City and had imposed steadily tougher penalties on the bank in recent years. Over the past year, agency examiners had remained on-site full-time.

Cathay Bank, a $1.8 billion-asset institution that serves Los Angeles' Chinese community, purchased $85 million of Golden City's assets, including its two branches, and all $82 million of its deposits. The California bank paid a $2.7 million premium to beat out other bidders.

- Scott Barancik

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.