Discussion Paper
Why Do Banks Fail? Bank Runs Versus Solvency
Abstract: Evidence from a 160-year-long panel of U.S. banks suggests that the ultimate cause of bank failures and banking crises is almost always a deterioration of bank fundamentals that leads to insolvency. As described in our previous post, bank failures—including those that involve bank runs—are typically preceded by a slow deterioration of bank fundamentals and are hence remarkably predictable. In this final post of our three-part series, we relate the findings discussed previously to theories of bank failures, and we discuss the policy implications of our findings.
Keywords: bank runs; financial crises; deposit insurance; bank failures;
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https://libertystreeteconomics.newyorkfed.org/2024/11/why-do-banks-fail-bank-runs-versus-solvency/
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Bibliographic Information
Provider: Federal Reserve Bank of New York
Part of Series: Liberty Street Economics
Publication Date: 2024-11-25
Number: 20241125