New York FED Liberty Street Economics – Blog Entry
by Sergio Correia, Stephan Luck, and Emil Verner
Why do banks fail? In a new working paper, the authors study more than 5,000 bank failures in the U.S. from 1865 to the present to understand whether failures are primarily caused by bank runs or by deteriorating solvency. In this first of three posts, they document that failing banks are characterized by rising asset losses, deteriorating solvency, and an increasing reliance on expensive noncore funding. Further, they find that problems in failing banks are often the consequence of rapid asset growth in the preceding decade.
Link:
New York FED Liberty Street Economics: Why Do Banks Fail? Three Facts About Failing Banks