Bank Failure
A bank failure is the closing of a financial institution by a government regulator due to the institution’s inability to meet its financial obligations. Bank failures can occur due to a variety of reasons, including mismanagement, fraud, or economic downturns. When a bank fails, the government regulator typically takes control of the institution and attempts to recover as much of the bank’s assets as possible. The government may also provide financial assistance to the bank in order to help it recover.
History of Bank Failures
Bank failures have been a part of the financial landscape since the earliest days of banking. In the United States, the first bank failure occurred in 1792, when the Bank of Pennsylvania failed due to mismanagement. Since then, there have been numerous bank failures throughout the country, with the most notable being the failure of the Bank of the United States in 1841. The Great Depression of the 1930s saw a wave of bank failures, with over 9,000 banks failing between 1930 and 1933.
In the modern era, bank failures have become less common due to increased regulation and oversight. However, the 2008 financial crisis saw a wave of bank failures, with 140 banks failing between 2008 and 2011. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 was enacted in response to the crisis, and it increased the government’s ability to regulate and monitor banks.
Comparison Table
| Year | Number of Bank Failures |
|---|---|
| 2008 | 25 |
| 2009 | 140 |
| 2010 | 157 |
| 2011 | 92 |
Summary
Bank failures have been a part of the financial landscape for centuries, and they can occur due to a variety of reasons. In the modern era, bank failures have become less common due to increased regulation and oversight. However, the 2008 financial crisis saw a wave of bank failures, with 140 banks failing between 2008 and 2011. For more information on bank failures, visit the Federal Deposit Insurance Corporation website or the Federal Reserve website.
See Also
- Bankruptcy
- Insolvency
- Liquidation
- Financial Crisis
- Federal Deposit Insurance Corporation (FDIC)
- Federal Reserve
- Banking Regulation
- Financial Regulation
- Financial Stability
- Financial System
