US bank lending drops

US banks posted their sharpest decline in lending since 1942 at the end of last year, suggesting that the industry's continued slide is making it harder for the economy to recover.

While top-tier banks are recovering at a faster rate, the rest of the industry is still suffering, according to a quarterly report from the Federal Deposit Insurance Corporation, reported The Wall Street Journal.

Besides registering their biggest full-year decline in total loans outstanding in 67 years, US banks set a number of grim milestones.

According to the FDIC, the number of US banks at risk of failing hit a 16 year high at 702. And, more than 5% of all loans were at least three months overdue - the highest level recorded in the 26 years the data has been collected.

FDIC chair Sheila Bair said banks were "bumping along the bottom of the credit cycle" and the number of bank failures in 2010 was likely to eclipse the 140 recorded last year.