Question

In: Economics

Bank Failures Despite the regulations that protect banks from failure, some do fail. Go to www2.fdic.gov/hsob/...

Bank Failures Despite the regulations that protect banks from failure, some do fail. Go to www2.fdic.gov/hsob/ Select the tab labeled “Bank Failures”. In your initial response to the topic you have to answer all questions:

1.What does the term “bank failure” mean? What role does FDIC insurance play?

2.How many banks failures occurred in the United States during the most recent complete calendar year?

3.How many banks failures occurred in the United States during 2016?

4.What were the total assets and total deposits held by the banks that failed during the most recent complete calendar year?

5.How many banks failed in 1937? 6.How it is possible to prevent bank failure?

Solutions

Expert Solution

1. The closing of an insolvent bank by a federal or state regulator. The comptroller of the currency has the power to close national banks; banking commissioners in the respective states close state-chartered banks. Banks close when they are unable to meet their obligations to depositors and others.

When a bank fails, the Federal Deposit Insurance Corporation (FDIC) covers the insured portion of a depositors balance.

2. Near about 8 banks banks failures occurred in the United States during the most recent complete calendar year.

3. 5 banks failures occurred in the United States during 2016.

4. Total assests: 5,081,737

Total deposits: 4,683,360

5. 75 banks failed in 1937.

If a bank were to fail, its customers would lose access to their accounts and their payment facilities (cheque books, cards). They would be ordinary creditors of a closed and liquidated bank. They would be treated like other ordinary creditors and compensated at the end of the liquidation with the funds recovered by the liquidator. Such a situation would very prejudicial to the bank's customers and, more generally, to the economy as a whole. This is simply unacceptable in a modern society where banks play such a major role.That is why deposit guarantee schemes have been in place in all European countries and around the world for many years. In France, this scheme is managed by the FGDR.If there were a possibility that a troubled bank might fail, and before the failure occurred, the banking authorities would ask the FGDR to intervene on behalf of the customers.


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