A Comparison of Small Bank Failures and FDIC Losses in the 1986–92 and 2007–13 Banking Crises

55 Pages Posted: 4 Dec 2017

See all articles by Eliana Balla

Eliana Balla

Federal Reserve Banks - Federal Reserve Bank of Richmond

Laurel Mazur

University of Maryland

Edward S. Prescott

Federal Reserve Banks - Federal Reserve Bank of Cleveland

John R. Walter

Federal Reserve Banks - Federal Reserve Bank of Richmond

Date Written: November 13, 2017

Abstract

Failure rates of small commercial banks during the banking crisis of the late 1980s were about 7.6%, which is significantly higher than the 5.7% failure rate during the recent crisis. We compare failure rates in the two periods using a statistical model that allows us to decompose the effect of changes in bank characteristics and economic shocks on failure rates. We find that the severe economic shocks of the recent crisis had a larger impact on high bank failure rates than bank characteristics.

Keywords: bank regulation, bank failures, Prompt Corrective Action, FDIC losses

JEL Classification: G21, G28

Suggested Citation

Balla, Eliana and Mazur, Laurel and Prescott, Edward (Ned) Simpson and Walter, John R., A Comparison of Small Bank Failures and FDIC Losses in the 1986–92 and 2007–13 Banking Crises (November 13, 2017). FRB of Cleveland Working Paper No. 17-19. Available at SSRN: https://ssrn.com/abstract=3081157 or http://dx.doi.org/10.2139/ssrn.3081157

Eliana Balla

Federal Reserve Banks - Federal Reserve Bank of Richmond ( email )

P.O. Box 27622
Richmond, VA 23261
United States

Laurel Mazur

University of Maryland ( email )

College Park
College Park, MD 20742
United States

Edward (Ned) Simpson Prescott (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Cleveland ( email )

P.O. Box 6387
Cleveland, OH 44101
United States

HOME PAGE: http://https://www.clevelandfed.org/people-search?pid=f8ca941e-4b51-41f6-95f8-c87f1d3806e5

John R. Walter

Federal Reserve Banks - Federal Reserve Bank of Richmond ( email )

P.O. Box 27622
Richmond, VA 23261
United States

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