Bank Failure

A bank failure occurs when a bank becomes insolvent and is unable to meet its obligations to depositors and Creditors. This can happen due to a variety of factors, including poor management, inadequate Capital, or significant loan losses. When a bank fails, it typically leads to the closure of the institution, often resulting in the loss of deposits for customers beyond the insured limit.

Examples and Cases

• Washington Mutual (2008): Once the largest savings and loan association in the U.S., it failed due to a high level of mortgage defaults and was seized by the FDIC, marking the largest bank failure in U.S. history.
• Lehman Brothers (2008): Although primarily an investment bank, its collapse is often cited in discussions of bank failures. It filed for Bankruptcy amid the financial crisis, leading to significant market turmoil.
• IndyMac Bank (2008): This bank failed as a result of high exposure to risky mortgage loans. The FDIC took control and later sold its Assets.
• First National Bank of Anthony (2014): A smaller bank that failed due to poor loan quality and economic conditions in its local area. The FDIC intervened and arranged for its sale to another institution.