Guide to Bank Failures: What Happens When a Bank Fails?

In the wake of the most recent bank failures, many questions have been raised about what precipitates a bank failure and what role the federal government has in mitigating the effects associated with these failures. The last time bank failures were in the news on a daily basis was during the financial crisis of 2008, when over 400 banks failed between 2008 and 2011. Although not widely publicized, it is common for at least a few banks to fail each year.

While no one expects their bank to fail, having a basic understanding of when a bank is at risk of failing and the federal government’s role in managing a bank’s failure will help impacted organizations navigate through the downstream effects of a failure. Wolters Kluwer Legal & Regulatory U.S. has prepared a Guide to Bank Failures for corporate legal departments that identifies the common indicators that a bank is at risk of failing and the role of the FDIC and other stakeholders in mitigating the effects of that failure. The Guide includes a series of Frequently Asked Questions addressing the effects of a failed bank and how to mitigate your risk.

The Guide covers the following key considerations:

• Common Indicators that a Bank is at Risk of Failing
• The FDIC’s Role in Managing a Bank Failure
• The Treasury Department’s Role in Managing a Bank Failure
• The Impact of a Bank Failure on Other Stakeholders
• Transnational Implications of Bank Failures

This Guide to Bank Failures is the second installment in a Wolters Kluwer Legal & Regulatory U.S. Toolkit. To view the first installment Due Diligence Checklist: Proactive Steps for Avoiding a Bank Failure CLICK HERE.