Assets held by California-based lender IndyMac Bancorp Inc were seized by US regulators on Friday.
A statement on the company's website announced that the company had been closed by the regulatory body, the Office of Thrift Supervision (OTS), and its assets had been taken over by the Federal Deposit Insurance Corporation (FDIC).
The mortgage lender experienced more than $1 billion (£500 million) in withdrawals over the last two weeks as concerns about its financial health increased.
OTS director John Reich said a "liquidity crisis" had resulted in the collapse of the bank, making emergency measures necessary. A spokesperson for the body added that the collapse of the mortgage specialist was the second-largest banking failure in the country's history.
Heavy losses on subprime home loans, securities tied to risky US mortgages, have resulted in firms shoring up their capital and avoiding lending to other institutions. The lack of cheap credit has made it more difficult for financial institutions around the world to meet their daily needs.
Over the past week, concerns have also been raised about the financial health of the country's two largest mortgage lending institutions, Freddie Mac and Fannie Mae. The two bodies fund close to 70 per cent of all US mortgages and analysts have warned that the failure of the two bodies could have far-reaching consequences.
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