Category: Financial Crisis 2025
The analysis published under this category are as follows.
Tuesday, February 11, 2025
These Are The Banks The Fed Believes Will Fail / Companies / Financial Crisis 2025
By: Avi_Gilburt
The NY Fed has recently published a study on bank failures in the U.S., examining the reasons why banks fail. For this study, the regulator constructed a large database with balance sheet information for most U.S. banks dating back to the Civil War. This dataset is truly unique, as other studies on bank failures have focused only on the period since 1976. As a result, the longer time horizon of this study allows it to include data on over 5,000 bank failures.
The study draws the following conclusions about the causes of bank failures.
First, failing banks typically experience rising losses and deteriorating solvency before failure. Non-performing loans increase, leading to higher loan loss provisions, which ultimately result in lower profitability and reduced equity-to-assets ratios.
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