This paper revisits the Swedish banking crisis (1919-26) that materialized as post war deflation replaced wartime inflation (1914-18). Inspired by Fisher's 'debt deflation theory', we employ survival analysis to 'predict' which banks would fail, given certain ex-ante bank characteristics. Our...

We develop refined probability bounds for bank insolvency risk measures based on the Z-score, analogous to those given by Cantelli's inequality under the additional assumption of unimodality of returns, drawing on the one-sided Vysochanskii-Petunin inequality. Illustrating empirically for US...

Bank failure prediction is a popular topic that requires highly accurate results. We contribute to the literature by determining whether models based on the crisis data are suitable for predicting bank failure during a stable period and which predictors can be held for long-term forecasting. In...

Purpose In this paper, the authors study the failure of Russian banks between 2012 and 2019. Design/methodology/approach The authors analyze the entire population of Russian banks and combine a logit model with the survival analysis. Findings In addition to the usual determinants, the authors...

This study investigates whether the ratio of long-term investment to total assets, the ratio of cash on hand to total assets, and the ratio of price-to-earnings are risk indicators for bank failures. Silicon Valley Bank (SVB), Signature Bank, and Silvergate Capital Corp., which experienced bank...

This paper analyzes a regulator's optimal strategic delay of resolving banks when the regulator's announcement of the intervention delay endogenously affects the depositors' run propensity. Given intervention, the regulator either liquidates the remaining illiquid assets (``prompt corrective...

The objective of this study is to explore the impact of Silicon Valley Bank (SVB) failure on the major global asset classes. Apart from US T-Bills and the Gold, we do not find any significant response of other asset classes on the event day. More importantly, Gold seems to have acted as a safe...

The quite recent (2007-2009) global financial crisis (GFC), which was caused by a mix of business, regulatory, supervisory, and macroeconomic (in terms of sub-optimal fiscal and/or monetary policies) failures, had a negative impact both on the financial system – with the failure, through the...

This paper examines the link between overbanking and financial distress during the interwar period in Europe, focusing on Italy as a case study. Using regression analysis and a systematic review of coeval literature, it shows that banks experiencing distress had opened scores of branches, had...

Deposit insurance systems are designed to balance the benefits of preventing bank runs and protecting ordinary savers against the costs of reduced market discipline and potential burdens on taxpayers. Design flaws of deposit insurance make the benefits too low and the costs too high. This paper...

This paper examines bank risk and its main determinants when gauged at various bank threshold variables. We apply the dynamic panel threshold estimation technique developed by Seo and Shin (2016) to a panel of 3,109 commercial banks in the United States during 2005–2019. A novel instrument is...

The economy continues to contract, albeit at a somewhat slower pace. Public finances improved in 2021, but only because spending collapsed faster than revenue generation. Testament to the continued atrophy of Lebanon's economy, the Lebanese Pound continues to depreciate sharply. The sharp...

We use the German Crisis of 1931, a key event of the Great Depression, to study how depositors behave during a bank run in the absence of deposit insurance. We find that deposits decline by around 20 percent during the run and that there is an equal outflow of retail and nonfinancial wholesale...

We analyze the problem of a policy authority (PA) that must decide when to resolve a troubled bank whose underlying solvency is uncertain. Delaying resolution increases the chance that information arrives that reveals the bank's true solvency state. However, delaying resolution also gives...

This paper examines prediction of U.S. bank failure with a probit model that uses bias-corrected technical efficiency estimated using bootstrap data envelopment analysis as the measure of management quality. The model is tested on a sample of failed and non-failed banks during the sub-prime...

Russia has witnessed a high number of bank failures over the last two decades. Using monthly data for 2002-2020, spanning four election cycles, we test the hypothesis that bank failures are less likely before presidential elections. We find that bank failures are less likely to occur in the...

Interest increased after the last global financial crisis in 2007, as the crisis revealed the challenges facing central banks in dealing with the financial crises arising from the banking sector, and thus exposing the financial positions of the banking sector to high risks that caused the...

Do the biggest tech companies have a bond funding edge? Are they the new ”Too-Big-to-Fail” (TBTF)? TBTF represents, among other things, the idea that the biggest firms (usually banks) receive an unfair funding advantage over smaller ones in the bond market. By investigating the tech...

This paper studies the relationship between the asset-liability mismatch and the losses on bank failures over the last 20 years in the U.S. banking system. We first develop a simple theoretical model in which banks can choose to misreport their losses to the regulator if they draw sufficiently...

Russia has witnessed a high number of bank failures over the last two decades. Using monthly data for 2002-2020, spanning four election cycles, we test the hypothesis that bank failures are less likely before presidential elections. We find that bank failures are less likely to occur in the...

We investigate the role of private equity (PE) in the resolution of failed banks after the 2008 financial crisis. Using proprietary failed bank acquisition data from the FDIC combined with data on PE investors, we find that PE investors made substantial investments in underperforming and riskier...

This article assesses the predictive power of sell-side stock analysts and credit rating agencies on the prevision of European banks distress events by introducing their respective disclosures into a logit early-warning system. The estimation is performed over the 2000Q3-2020Q1 period. As direct...

We study how heterogeneity in banks’ asset holdings affects fragility. In the model, banks face a risk of bank runs and have to liquidate long-term assets in a common market to repay runners. Liquidation prices are depressed when many banks sell their assets at the same time. When banks are...

The fall of LTCM (Long Term Capital Management) and Lehman Brothers remain some of the most debated topics in modern financial history. Following the Russian financial crisis of 1998, LTCM, a new but prominent hedge fund, found itself on the edge of bankruptcy. However, LTCM was ‘saved’ in a...

This paper looks into the challenges ahead for deposit insurers and underscores the urgency of testing contingency planning and crisis management frameworks at national and system-wide levels, and the importance of communication, cooperation and coordination at home and abroad.• Financial...

Using a proprietary database of failed bank auction participants, I examine whether acquiring a failed bank creates shareholder value by using the losers' post-acquisition performance as a counterfactual. In the three years post-acquisition, acquirers with Shared-Loss Agreements (SLAs), where...

Do the biggest tech companies have a bond funding edge? Are they the new "Too-Big-to-Fail" (TBTF)? TBTF represents, among other things, the idea that the biggest firms (usually banks) receive an unfair funding advantage over smaller ones in the bond market. By investigating the tech financial...

This paper argues that in the European Union (EU) deposit insurance funds are too difficult to use in bank resolution and too easy to use outside resolution. The paper proposes reforms in three areas for the effective management of bank failures of small and medium-sized banks in the European...

Policymakers across countries have been seeking to strengthen the institutional framework to control fiscal costs and feedback effects to the real economy generated by bank failures. On a cross-section of countries, we find evidence that suggests that bank supervisors’ intervention in bank...

We analyze the determinants of individual bank failures arising from solvency and liquidity shortages in a stylized banking system following Krause and Giansante (2012) where banks are characterized by the amount of capital, cash reserves and their exposure to the interbank loan market as...

Roughly eight years after the adoption of its legal basis, an assessment of the Single Resolution Mechanism remains difficult. With only one resolution case completed so far, a substantial part of the resolution framework has not yet been tested. While the recent inauguration of the European...

We develop a model of banking industry dynamics to study the quantitative impact of regulatory policies on bank risk taking and market structure as well as the feedback effect of market structure on the efficacy of policy. Since our model is matched to U.S. data, we propose a market structure...

In this paper, we investigate whether the liquidity support from the 2008 quantitative easing (QE) influenced the capital structures of large firms. We find that large firms generally increased their proportions of debt financing and leverage ratios during QE. Among small firms, only those with...