View source for Finance:Bank failure

{{Short description|Insolvency or illiquidity of a bank}}
[[File:Schwenk-bank-failure-1914.jpg|thumb|right|300px|Depositors "[[Finance:Bank run|run]]" on a failing New York City bank in an effort to recover their money, July 1914]]
A '''bank failure''' occurs when a [[Social:Bank|bank]] is unable to meet its obligations to its depositors or other [[Finance:Creditor|creditor]]s because it has become insolvent or too illiquid to meet its liabilities.<ref name=":0">{{cite web| url =https://www.fdic.gov/consumers/banking/facts/ | title = When a Bank Fails - Facts for Depositors, Creditors, and Borrowers | publisher=Federal Deposit Insurance Corporation}}</ref> A bank usually fails economically when the [[Finance:Market value|market value]] of its [[Finance:Asset|asset]]s declines to a value that is less than the market value of its liabilities. The insolvent bank either borrows from other [[Finance:Solvency|solvent]] banks or sells its assets at a lower price than its market value to generate liquid money to pay its depositors on demand. The inability of the solvent banks to lend liquid money to the insolvent bank creates a bank panic among the depositors as more depositors try to take out cash deposits from the bank. As such, the bank is unable to fulfill the demands of all of its depositors on time. A bank may be taken over by the regulating government agency if its [[Finance:Equity|shareholders' equity]] are below the regulatory minimum.

The failure of a bank is generally considered to be of more importance than the failure of other types of business firms because of the interconnectedness and fragility of banking institutions. Research has shown that the market value of customers of the failed banks is adversely affected at the date of the failure announcements.<ref>{{Cite web|last=Brewer III|first=Elijah |last2=Genay| first2=Hesna |last3=Hunter |first3=William Curt |last4=Kaufman |first4=George G.|date=August 26, 2002|title=The Value of Banking Relationships During a Financial Crisis: Evidence from Failures of Japanese Banks |url=https://www.frbsf.org/economic-research/files/Breweretal.pdf |url-status=live|access-date=2021-05-14|website=Federal Reserve Bank of Chicago|archive-url=https://web.archive.org/web/20161225033703/http://www.frbsf.org/economic-research/files/Breweretal.pdf |archive-date=2016-12-25 }}</ref> It is often feared that the spill over effects of a failure of one bank can quickly spread throughout the economy and possibly result in the failure of other banks, whether or not those banks were [[Finance:Solvency|solvent]] at the time as the marginal depositors try to take out cash deposits from these banks to avoid from suffering losses. Thereby, the spill over effect of bank panic or [[Finance:Systemic risk|systemic risk]] has a multiplier effect on all banks and financial institutions leading to a greater effect of bank failure in the economy. As a result, banking institutions are typically subjected to rigorous [[Finance:Bank regulation|regulation]], and bank failures are of major [[Social:Public policy|public policy]] concern in countries across the world.<ref>{{cite web |url=https://www.cato.org/sites/cato.org/files/serials/files/cato-journal/1996/5/cj16n1-2.pdf | title=Bank Failures, Systemic Risk, and Bank Regulation | publisher=The Cato Institute | date=Spring 1996 | archive-url=https://web.archive.org/web/20081208183021/http://www.cato.org/pubs/journal/cj16n1-2.html | archive-date=8 December 2008| url-status=live}}</ref>

==Notable acquisitions of failed banks==
This list does not include partial purchases by governments to prevent bank or banking system failures, such as government intervention during the subprime mortgage crisis.

{| class="wikitable sortable"
|-
! Announcement date
! Target
! Acquirer
! Transaction value <br /> (US$ billion)
! Type
|-
|1999-11-29<ref>{{Cite web|title=RBS launches $43B bid for NatWest - Nov. 29, 1999|url=https://money.cnn.com/1999/11/29/europe/rbs_natwest_a/|access-date=2021-05-14|website=money.cnn.com}}</ref>
|{{Flagicon|United Kingdom}} National Westminster Bank Plc
|{{Flagicon|Scotland}} Royal Bank of Scotland
| style="text-align:right;" | 42.5
|-
|2003-10-27<ref>{{Cite web |title=Bank of America to acquire FleetBoston for $47B - Oct. 27, 2003 | url=https://money.cnn.com/2003/10/27/news/companies/ba_fleet/ | work=CNN | date=October 27, 2003}}</ref>
|{{Flagicon|United States}} FleetBoston Financial
|{{Flagicon|United States}} [[Company:Bank of America|Bank of America]]
| style="text-align:right;" | 47
|-
|2004-01-15<ref>{{Cite news |title=J.P. Morgan to buy Bank One for $58 billion - Jan. 15, 2004 |url=https://money.cnn.com/2004/01/14/news/deals/jpmorgan_bankone/ | work=CNN | date=January 15, 2004}}</ref>
|{{Flagicon|United States}} Bank One Corporation
|{{Flagicon|United States}} [[Company:JPMorgan Chase|JPMorgan Chase]] 
| style="text-align:right;" | 58
|-
|2006-01-01<ref>{{Cite news |title=Bank Of America Acquires MBNA | url=https://www.cbsnews.com/news/bank-of-america-acquires-mbna/ | work=CBS News | agency=Associated Press | date=January 1, 2006}}</ref>
|{{Flagicon|United States}} MBNA
|{{Flagicon|United States}} Bank of America
| style="text-align:right;" | 34.2
|-
|2007-05-20<ref>{{Cite news|last=Biondi|first=Paolo|last2=Sisto|first2=Alberto|date=2007-05-20|title=UniCredit agrees to buy Capitalia in $29 bln deal|language=en|work=Reuters|url=https://www.reuters.com/article/us-capitalia-unicredit-idUSL184229220070520|access-date=2021-05-14}}</ref>
|{{Flagicon|Italy}} Capitalia
|{{Flagicon|Italy}} [[Company:UniCredit|UniCredit]]
| style="text-align:right;" | 29.47
|-
|2007-09-28<ref>{{Cite news|last=Wilchins|first=Dan|date=2007-09-28|title=ING Bank to acquire NetBank deposits|language=en|work=Reuters|url=https://www.reuters.com/article/netbank-ing-idUSWNAS514820070928|access-date=2021-05-14}}</ref>
|{{Flagicon|United States}} NetBank
|{{Flagicon|Netherlands}} [[Company:ING Group|ING Group]]
| style="text-align:right;" | 0.014
|-
|-
| 2007-10-09
| {{flagicon|Netherlands}} ABN AMRO
| {{flagicon|Scotland}} Royal Bank of Scotland {{flagicon|Belgium}} [[Company:Fortis|Fortis]] {{flagicon|Spain}} Santander
| style="text-align:right;" | 77.23{{dubious|reason=This is vastly larger than seems reasonable|date=June 2022}}
| Breakup, nationalization of some components with return to publicly traded company
|-
| 2008-02-22
| {{flagicon|United Kingdom}} [[Company:Northern Rock|Northern Rock]]
| {{flagicon|United Kingdom}} Government of the United Kingdom
| style="text-align:right;" | 41.213
|-
| 2008-04-01
| {{flagicon|United States}} Bear Stearns
| {{flagicon|United States}} JPMorgan
| style="text-align:right;" | 2.2
|-
| 2008-07-01
| {{flagicon|United States}} Countrywide Financial
| {{flagicon|United States}} Bank of America
| style="text-align:right;" | 4
|-
| 2008-07-14
| {{flagicon|United Kingdom}} Alliance & Leicester
| {{flagicon|Spain}} Santander
| style="text-align:right;" | 1.93
|-
| 2008-08-31
| {{flagicon|Germany}} Dresdner Kleinwort
| {{flagicon|Germany}} [[Company:Commerzbank|Commerzbank]]
| style="text-align:right;" | 10.812
|-
| 2008-09-07
| {{flagicon|United States}} Fannie Mae and Freddie Mac
| {{flagicon|United States}} Federal Housing Finance Agency
| style="text-align:right;" | 5,000{{dubious|reason=This is vastly larger than seems reasonable|date=June 2022}}
| Federal conservatorship with expected return to independent management
|-
| 2008-09-14
| {{flagicon|United States}} [[Company:Merrill Lynch|Merrill Lynch]]
| {{flagicon|United States}} Bank of America
| style="text-align:right;" | 44
|-
| 2008-09-17
| {{flagicon|United States}} Lehman Brothers
| {{flagicon|United Kingdom}} [[Company:Barclays|Barclays]]
| style="text-align:right;" | 1.3
|-
| 2008-09-18
| {{flagicon|United Kingdom}} HBOS
| {{flagicon|United Kingdom}} Lloyds TSB
| style="text-align:right;" | 33.475
|-
| 2008-09-26
| {{flagicon|United States}} Lehman Brothers
| {{flagicon|Japan}} [[Company:Nomura Holdings|Nomura Holdings]]
| style="text-align:right;" | 1.3
|-
| 2008-09-26
| {{flagicon|United States}} Washington Mutual
| {{flagicon|United States}} JPMorgan
| style="text-align:right;" | 1.9
|-
| 2008-09-28
| {{flagicon|United Kingdom}} Bradford & Bingley
| {{flagicon|United Kingdom}} Government of the United Kingdom {{flagicon|Spain}} Santander
| style="text-align:right;" | 1.838
|-
| 2008-09-28
| {{flagicon|Belgium}} {{flagicon|Luxembourg}} {{flagicon|Netherlands}} [[Company:Fortis|Fortis]]
| {{flagicon|France}} [[Company:BNP Paribas|BNP Paribas]]
| style="text-align:right;" | 12.356
|-
| 2008-09-29
| {{flagicon|United Kingdom}} Abbey National
| {{flagicon|United Kingdom}} Government of the United Kingdom {{flagicon|Spain}} Santander
| style="text-align:right;" | 2.298
|-
| 2008-09-30
| {{flagicon|Belgium}} Dexia
| {{flagicon|Belgium}} {{flagicon|France}} {{flagicon|Luxembourg}} The Governments of Belgium, France and Luxembourg
| style="text-align:right;" | 7.06
|-
| 2008-10-03
| {{flagicon|United States}} Wachovia
| {{flagicon|United States}} Wells Fargo
| style="text-align:right;" | 15
|-
| 2008-10-07
| {{flagicon|Iceland}} [[Company:Landsbanki|Landsbanki]]
| {{flagicon|Iceland}} Icelandic Financial Supervisory Authority
| style="text-align:right;" | 4.192
| UK assets seized by UK government; bad assets nationalized by Iceland and retail operations reorganized as Landsbankinn
|-
| 2008-10-08
| {{flagicon|Iceland}} [[Company:Glitnir (bank)|Glitnir]]
| {{flagicon|Iceland}} Icelandic Financial Supervisory Authority
| style="text-align:right;" | 3.254
|-
| 2008-10-09
| {{flagicon|Iceland}} [[Company:Kaupthing Bank|Kaupthing Bank]]
| {{flagicon|Iceland}} Icelandic Financial Supervisory Authority
| style="text-align:right;" | 1.257
|-
| 2008-10-13
| {{flagicon|United Kingdom}} [[Company:Lloyds Banking Group|Lloyds Banking Group]]
| {{flagicon|United Kingdom}} Government of the United Kingdom
| style="text-align:right;" | 26.045
|-
| 2008-10-13
| {{Flagicon|Scotland}} Royal Bank of Scotland Group
| {{flagicon|United Kingdom}} Government of the United Kingdom
| style="text-align:right;" | 30.641
|-
| 2008-10-14
| {{flagicon|United States}} Bank of America
| {{flagicon|United States}} United States Federal Government
| style="text-align:right;" | 45
|-
| 2008-10-14
| {{flagicon|United States}} Bank of New York Mellon
| {{flagicon|United States}} United States Federal Government
| style="text-align:right;" | 3
|-
| 2008-10-14
| {{flagicon|United States}} [[Company:Goldman Sachs|Goldman Sachs]]
| {{flagicon|United States}} United States Federal Government
| style="text-align:right;" | 10
|-
| 2008-10-14
| {{flagicon|United States}} JP Morgan
| {{flagicon|United States}} United States Federal Government
| style="text-align:right;" | 25
|-
| 2008-10-14
| {{flagicon|United States}} Morgan Stanley
| {{flagicon|United States}} United States Federal Government
| style="text-align:right;" | 10
|-
| 2008-10-14
| {{flagicon|United States}} [[Company:State Street Corporation|State Street]]
| {{flagicon|United States}} United States Federal Government
| style="text-align:right;" | 2
|-
| 2008-10-14
| {{flagicon|United States}} Wells Fargo
| {{flagicon|United States}} United States Federal Government
| style="text-align:right;" | 25
|-
| 2008-10-22
| {{flagicon|Netherlands}} [[Company:ING Group|ING Group]]
| {{flagicon|Netherlands}} Government of the Netherlands
| style="text-align:right;" | 11.032
|-
| 2009-02-11
| {{flagicon|Republic of Ireland}} Allied Irish Bank
| {{flagicon|Republic of Ireland}} Government of the Republic of Ireland
| style="text-align:right;" | 3.861
|-
| 2009-02-11
| {{flagicon|Republic of Ireland}} [[Company:Anglo Irish Bank|Anglo Irish Bank]]
| {{flagicon|Republic of Ireland}} Government of the Republic of Ireland
| style="text-align:right;" | 13.57
|-
| 2009-02-11
| {{flagicon|Republic of Ireland}} [[Company:Bank of Ireland|Bank of Ireland]]
| {{flagicon|Republic of Ireland}} Government of the Republic of Ireland
| style="text-align:right;" | 3.861
|-
|2009-03-19<ref>{{Cite news|date=2009-03-20|title=OneWest completes acquisition of Indymac Assets|language=en|work=Reuters|url=https://www.reuters.com/article/onewest-indymac-idUSN1946559620090320|access-date=2021-05-14}}</ref>
|{{Flagicon|United States}} IndyMac
|{{Flagicon|United States}} OneWest Bank
| style="text-align:right;" | unknown
|-
| 2012-03-13
| {{flagicon|Greece}} Alpha Bank
| {{flagicon|Greece}} Government of Greece
| style="text-align:right;" | 2.096
|-
| 2012-03-13
| {{flagicon|Greece}} Eurobank
| {{flagicon|Greece}} Government of Greece
| style="text-align:right;" | 4.633
|-
| 2012-03-13
| {{flagicon|Greece}} [[Company:National Bank of Greece|National Bank of Greece]]
| {{flagicon|Greece}} Government of Greece
| style="text-align:right;" | 7.612
|-
| 2012-03-13
| {{flagicon|Greece}} [[Company:Piraeus Bank|Piraeus Bank]]
| {{flagicon|Greece}} Government of Greece
| style="text-align:right;" | 5.516
|-
| 2012-03-25
| {{flagicon|Cyprus}} Laiki Bank
| {{flagicon|Cyprus}} Bank of Cyprus
| style="text-align:right;" | 10.812
|-
| 2012-05-25
| {{flagicon|Spain}} [[Company:Bankia|Bankia]]
| {{flagicon|Spain}} Government of Spain
| style="text-align:right;" | 20.962
|-
| 2012-06-07
| {{flagicon|Portugal}} Caixa Geral de Depositos
| {{flagicon|Portugal}} Government of Portugal
| style="text-align:right;" | 1.78
|-
| 2012-06-07
| {{flagicon|Portugal}} Millennium BCP
| {{flagicon|Portugal}} Government of Portugal
| style="text-align:right;" | 3.3
|-
|}

==Bank failures in the U.S.==
In the U.S., deposits in savings and checking accounts are backed by the FDIC. Currently, each account owner is insured up to $250,000 in the event of a bank failure.<ref>{{cite web |title=Deposit Insurance FAQs|url=https://www.fdic.gov/deposit/deposits/faq.html | publisher=Federal Deposit Insurance Corporation}}</ref> When a bank fails, in addition to insuring the deposits, the FDIC acts as the receiver of the failed bank, taking control of the bank's assets and deciding how to settle its debts. The number of bank failures has been tracked and published by the FDIC since 1934, and has decreased after a peak in 2010 due to the [[Finance:Financial crisis of 2007–2008|financial crisis of 2007–2008]].<ref>{{Cite web |title=FDIC {{!}} Failed Bank List |url=https://www.fdic.gov/resources/resolutions/bank-failures/failed-bank-list/ | publisher=Federal Deposit Insurance Corporation}}</ref> 

Since the year 2000, over 500 banks have failed. The [[History:2010s|2010s]] saw the most bank failures in recent memory, with 367 banks collapsing over that decade. However, while the 2010s saw the most banks fail, it wasn't the worst decade in terms of the value of the banks going under. The [[History:2000s|2000s]] saw 192 banks go under with $533 billion in assets ($749 billion in 2023 dollars) compared to the $273 billion ($354 billion) lost in the 2010s.<ref>{{cite web |last=Laycock |first=Richard |date=2023-05-11 |title=List of bank failures: 2000 to 2023 {{!}} Finder |url=https://www.finder.com/bank-failures |access-date=2023-05-12 |website=finder.com |language=en-US}}</ref>

No advance notice is given to the public when a bank fails.<ref name=":0" /> Under ideal circumstances, a bank failure can occur without customers losing access to their funds at any point. For example, in the 2008 failure of Washington Mutual the FDIC was able to broker a deal in which JP Morgan Chase bought the assets of Washington Mutual for $1.9 billion.<ref>{{cite news | url=https://money.cnn.com/2008/09/25/news/companies/JPM_WaMu/ | title=JPMorgan buys WaMu | first1=David | last1=Ellis | first2=Jeanne | last2=Sahadi | work=CNN | date=September 26, 2008}}</ref> Existing customers were immediately turned into JP Morgan Chase customers, without disruption in their ability to use their [[Finance:Automated teller machine|ATM]] cards or do banking at branches.<ref>{{cite web |url=https://fraser.stlouisfed.org/title/washington-mutual-acquired-jpmorgan-chase-5090 |title=OTS 08-046 - Washington Mutual Acquired by JPMorgan Chase | publisher=Office of Thrift Supervision | date=September 25, 2008 | archive-url= https://web.archive.org/web/20090115032649/http://www.ots.treas.gov/?p=PressReleases&ContentRecord_id=9c306c81-1e0b-8562-eb0c-fed5429a3a56| archive-date= 15 January 2009 <!--DASHBot-->| url-status=live}}</ref> Such policies are designed to discourage [[Finance:Bank run|bank run]]s that might cause economic damage on a wider scale.

==Global failure==
The failure of a bank is relevant not only to the country in which it is headquartered, but for all other nations with which it conducts business. This dynamic was highlighted during the [[Finance:Financial crisis of 2007–2008|financial crisis of 2007–2008]], when the failures of major [[Finance:Bulge bracket|bulge bracket]] investment banks affected local economies globally. This interconnectedness was manifested not on a high level, with respect to deals negotiated between major companies from different parts of the world, but also to the global nature of any one company's makeup. Outsourcing is a key example of this makeup; as major banks such as Lehman Brothers and Bear Stearns failed, the employees from countries other than the {{wipe|United States}} suffered in turn. A 2015 analysis by the Bank of England found greater interconnectedness between banks has led to a greater transmission of stresses during a time of recession.<ref>{{Cite web |last=Zijun |first=Liu |last2=Quiet |first2=Stephanie |last3=Roth |first3=Benedict |date=2015 |title=Banking sector interconnectedness: what is it, how can we measure it and why does it matter?|url=https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2015/banking-sector-interconnectedness-what-is-it-how-can-we-measure-it-and-why-does-it-matter.pdf |url-status=live |website=Bank of England|archive-url=https://web.archive.org/web/20211005195017/https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2015/banking-sector-interconnectedness-what-is-it-how-can-we-measure-it-and-why-does-it-matter.pdf |archive-date=2021-10-05 }}</ref>

==See also==
* [[Finance:Bank run|Bank run]]
* Causes of the Great Depression
* List of banks acquired or bankrupted in the United States during the 2007–2008 financial crisis
* List of bank failures in the United States (2008–present)
* List of largest bank failures in the United States
* [[Finance:Too big to fail|Too big to fail]]
* [[Finance:Volcker Rule|Volcker Rule]]
* [[Finance:Zombie bank|Zombie bank]]

==References==
{{Reflist}}

==Further reading==
* Calomiris, Charles W., and Joseph R. Mason. "Fundamentals, panics, and bank distress during the depression." ''American Economic Review'' (2003): 1615-1647. [http://academiccommons.columbia.edu/download/fedora_content/download/ac%3A136991/CONTENT/000282803322655473.pdf online]
* Carlson, Mark. "Causes of bank suspensions in the panic of 1893." ''Explorations in Economic History'' 42.1 (2005): 56-80. [https://www.federalreserve.gov/PubS/feds/2002/200211/ online]
* Wicker, Elmus. ''The banking panics of the Great Depression'' (2000).
* Wicker, Elmus. ''Banking panics of the gilded age'' (2006).
* Wicker, Elmus. "A Reconsideration of the Causes of the Banking Panic of 1930." ''Journal of Economic History'' 40.03 (1980): 571-583.

==External links==
* [https://www.fdic.gov/resources/resolutions/bank-failures/failed-bank-list/ FDIC's list of failed banks since 2000]
* [https://www.thestreet.com/investing/new-interactive-bank-failure-map-10464237 TheStreet.com Interactive bank failure map (2009)]
*[https://thebossmonk.com/business/story-of-indian-banking-failure/ The Story of Indian Bank Failure] {{Webarchive|url=https://web.archive.org/web/20220819145729/https://thebossmonk.com/business/story-of-indian-banking-failure/ |date=2022-08-19 }}


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[[Category:Banking]]
[[Category:Bank failures| ]]

{{Sourceattribution|Bank failure}}