Bank Failures and the Source of Strength Doctrine

Vincent Bouvatier, Michael Brei and Xi Yang ()
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Xi Yang: EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique

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Abstract: This paper examines the determinants of bank failures in the US banking system during the recent financial crisis. The analysis employs a dataset on the financial statements of FDIC-insured commercial banks and their bank holding companies, along with information on bank failures, mergers, and acquisitions. The econometric evidence suggests that failed banks have been characterized by significantly higher loan growth rates, well ahead of the financial crisis, coupled with higher exposures to the mortgage market segment and to funding in the form of brokered deposits. We also find evidence that commercial banks have been less likely to fail, when they belonged to well-capitalized and profitable bank holding companies with lower exposures to short-term funding. Our results provide empirical support for the recent modifications in bank regulation and supervision which introduce countercyclical components for capital buffers and a more comprehensive supervision of consolidated banking groups

Keywords: financial crises; bank failures; bank regulation (search for similar items in EconPapers)
Date: 2014
Note: View the original document on HAL open archive server: https://hal.science/hal-04141351
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Working Paper: Bank Failures and the Source of Strength Doctrine (2014)
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