During 2007-10, failures eliminated 318 U.S. commercial banks and savings institutions, about 4 percent of the total number of banks operating at the end of 2006. The assets and deposits of many failed banks were acquired by institutions that already had offices in markets served by the failed...

The academic literature has regularly argued that market discipline can support regulatory authority mechanisms in ensuring banking sector stability. This includes, amongst other things, using forward-looking market prices to identify those credit institutions that are most at risk of failure....

We estimate the structural parameters of a quantitative banking model featuring maturity transformation and endogenous failures in the presence of undiversifiable background risk and regulatory constraints. Pervasive balance sheet cross-sectional heterogeneity can be rationalized with...

The spectacular failure of the 150-year-old investment bank Lehman Brothers on September 15th, 2008 was a major turning point in the global financial crisis that broke out in the summer of 2007. Through the use of stock market data and credit default swap (CDS) spreads, this paper examines...

This article analyzes bank bankruptcy regimes across 142 countries. By employing factor analysis, we identify five main dimensions of bank bankruptcy frameworks: (1) difficulty of forbearance and ease of court appeal, (2) availability of supervisory tools, (3) court involvement, (4) supervisory...

Banks and financial intermediaries perform important roles for the smooth functioning of the economy such as channeling resources from savers to productive projects and providing payment services. Because bank failure can result in significant costs for the economy, an efficient resolution...

As the recent financial crisis unfolded, a new financial instrument—contingent convertible (coco) bonds—was widely considered as a mechanism for promptly recapitalizing overlevered financial institutions. Essentially, the conversion feature of coco bonds would replace supervisory discretion...

Government bailouts during the recent financial crisis were controversial because of the burden on taxpayers and because even if taxpayers eventually get their money back, such bailouts can undermine banks’ incentives not to take excessive risk in the future. New regulatory reforms aim to...

It is common knowledge that the banking industry has become increasingly consolidated over the past 25 years. In 1990, prior to a number of banking law changes, the nation housed around 12,500 charters. Today, there are roughly 6,000 charters, with consolidated assets of the top 10 U.S. banking...

Many people want to put size limits on “too big to fail” banks, given their risks to the broader economy. Such limits, however, could raise the cost of providing banking services by preventing banks from exploiting economies of scale.