New Economics Study Findings Reported from Federal Reserve Bank (Failing Banks*): Economics

2025 NOV 12 (NewsRx) -- By a News Reporter-Staff News Editor at Economics Daily Report -- Data detailed on Economics have been presented. According to news originating from Richmond, Virginia, by NewsRx correspondents, research stated, “Why do banks fail? We create a panel covering most commercial banks from 1863 through 2024 to study the history of failing banks in the United States. Failing banks are characterized by rising asset losses, deteriorating solvency, and an increasing reliance on expensive noncore funding.”

Financial support for this research came from MIT Research Support Committee’s Ferry Fund.

Our news journalists obtained a quote from the research from Federal Reserve Bank, “These commonalities imply that bank failures are highly predictable using simple accounting metrics from publicly available financial statements. Failures with runs were common before deposit insurance, but these failures are strongly related to weak fundamentals, casting doubt on the importance of non-fundamental runs. Furthermore, low recovery rates on failed banks’ assets suggest that most failed banks subject to runs were fundamentally insolvent, barring large value destruction of receiverships.”

According to the news editors, the research concluded: “Altogether, our evidence suggests that the primary cause of bank failures and banking crises is almost always and everywhere a deterioration of bank fundamentals.”

This research has been peer-reviewed.

For more information on this research see: Failing Banks*. The Quarterly Journal of Economics, 2025. The Quarterly Journal of Economics can be contacted at: Oxford Univ Press Inc, Journals Dept, 2001 Evans Rd, Cary, NC 27513, USA.

The news correspondents report that additional information may be obtained from Sergio Correia, Federal Reserve Bank, Richmond, VA 23219, United States. Additional authors for this research include Stephan Luck and Emil Verner.

The direct object identifier (DOI) for that additional information is: https://doi.org/10.1093/qje/qjaf044. This DOI is a link to an online electronic document that is either free or for purchase, and can be your direct source for a journal article and its citation.

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