Resolution Costs and the Business Cycle

FDIC Working Paper No. 2004-01

30 Pages Posted: 3 Mar 2006

See all articles by Kathleen McDill

Kathleen McDill

Federal Deposit Insurance Corporation (FDIC)

Date Written: March 2004


There are a number of factors that may contribute to the cost of resolving a failed bank. In this paper we study the behavior of the costs of resolving a failed bank as those costs change over the business cycle. We find evidence that the costs are related to the state of the business cycle. Both the contraction and the expansion that preceded it appear to be important in explaining the loss that the FDIC experiences when a bank fails. In addition, a number of other bank-specific variables appear to be linked to loss rates for a failed institution.

Suggested Citation

McDill, Kathleen, Resolution Costs and the Business Cycle (March 2004). FDIC Working Paper No. 2004-01, Available at SSRN: or

Kathleen McDill (Contact Author)

Federal Deposit Insurance Corporation (FDIC) ( email )

550 17th Street NW
Washington, DC 20429
United States
202-898-3705 (Phone)

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