scholarly journals Insider Bank Runs: Community Bank Fragility and the Financial Crisis of 2007

2015 ◽  
Author(s):  
Christopher Henderson ◽  
William W. Lang ◽  
William E. Jackson
Keyword(s):  
Financial Crisis ◽  
Bank Runs ◽  
Community Bank

scholarly journals Insider Bank Runs: Community Bank Fragility and the Financial Crisis of 2007

2015 ◽  
Author(s):  
Christopher Henderson ◽  
William W. Lang ◽  
William E. Jackson
Keyword(s):  
Financial Crisis ◽  
Bank Runs ◽  
Community Bank

scholarly journals Diversification and Community Bank Performance during a Financial Crisis

2016 ◽  
Vol 3 (4) ◽  
pp. 1 ◽  
Author(s):  
Kathy Estes
Keyword(s):  
Financial Crisis ◽  
Economies Of Scale ◽  
Economic Downturn ◽  
Community Banks ◽  
Community Bank ◽  
Diversification Strategies ◽  
Multiple Regression Models ◽  
Recent Financial Crisis ◽  
The Impact ◽  
The Relationship

<p><em>Many U.S. banks failed or performed poorly during the recent financial crisis.  Although the costliest failures were large institutions, the majority of failures were community banks (less than $1 billion in total assets).  Community banks, which are considered instrumental in small business lending and employment growth, face different risks and challenges than their larger counterparts, including a lack of economies of scale and scope and exclusion from “too-big-to-fail” status.  These challenges, coupled with the recent failures, motivate research into potential strategies managers can use to improve performance.  This study examined the relationship between three potential diversification strategies and community bank risk-adjusted performance from 2007 to 2011.  Understanding these relationships could improve management’s decision-making, allowing them to choose risk-mitigating strategies during a severe economic downturn.  Herfindahl-Hirschman Indexes (HHIs) were calculated as proxies for geographic, activity, and asset diversification.  Multiple regression models for each of the five years were used to calculate the impact of diversification variables on risk-adjusted ROA.  The results show that diversification in all areas is directly related to performance; however, only the asset diversification relationship is significant.  To the extent possible for community banks, diversification may improve risk-adjusted performance.</em></p>

scholarly journals The Failure Mechanics of Dealer Banks

2010 ◽  
Vol 24 (1) ◽  
pp. 51-72 ◽  
Author(s):  
Darrell Duffie
Keyword(s):  
Financial Crisis ◽  
Commercial Bank ◽  
Systemic Risk ◽  
Bank Runs ◽  
Too Big To Fail ◽  
Failure Mechanics ◽  
Large Complex ◽  
Lehman Brothers ◽  
Recent Financial Crisis

During the recent financial crisis, major dealer banks—that is, banks that intermediate markets for securities and derivatives—suffered from new forms of bank runs. The most vivid examples are the 2008 failures of Bear Stearns and Lehman Brothers. Dealer banks are often parts of large complex financial organizations whose failures can damage the economy significantly. As a result, they are sometimes considered “too big to fail.” The mechanics by which dealer banks can fail and the policies available to treat the systemic risk of their failures differ markedly from the case of conventional commercial bank runs. These failure mechanics are the focus of this article. This is not a review of the financial crisis of 2007–2009. Systemic risk is considered only in passing. Both the financial crisis and the systemic importance of large dealer banks are nevertheless obvious and important motivations.

scholarly journals Diversification and Community Bank Performance during a Financial Crisis

2014 ◽  
Vol 3 (4) ◽  
pp. 01-40
Author(s):  
Kathy Estes
Keyword(s):  
Financial Crisis ◽  
Economies Of Scale ◽  
Economic Downturn ◽  
Community Banks ◽  
Community Bank ◽  
Diversification Strategies ◽  
Multiple Regression Models ◽  
Recent Financial Crisis ◽  
The Impact ◽  
The Relationship

Many U.S. banks failed or performed poorly during the recent financial crisis.  Although the costliest failures were large institutions, the majority of failures were community banks (less than $1 billion in total assets).  Community banks, which are considered instrumental in small business lending and employment growth, face different risks and challenges than their larger counterparts, including a lack of economies of scale and scope and exclusion from “too-big-to-fail” status.  These challenges, coupled with the recent failures, motivate research into potential strategies managers can use to improve performance.  This study examined the relationship between three potential diversification strategies and community bank risk-adjusted performance from 2007 to 2011.  Understanding these relationships could improve management’s decision-making, allowing them to choose risk-mitigating strategies during a severe economic downturn.  Herfindahl-Hirschman Indexes (HHIs) were calculated as proxies for geographic, activity, and asset diversification.  Multiple regression models for each of the five years were used to calculate the impact of diversification variables on risk-adjusted ROA.  The results show that diversification in all areas is directly related to performance; however, only the asset diversification relationship is significant.  To the extent possible for community banks, diversification may improve risk-adjusted performance.

scholarly journals Financial crisis in East Asia: bank runs, asset bubbles and antidotes

1998 ◽  
Vol 165 ◽  
pp. 66-82 ◽  
Author(s):  
Marcus Miller ◽  
Pongsak Luangaram
Keyword(s):  
Financial Crisis ◽  
East Asia ◽  
Capital Inflows ◽  
Bank Runs ◽  
Current Crisis ◽  
Asset Bubbles ◽  
Crisis Prevention ◽  
Rapid Economic Growth ◽  
Recent Developments ◽  
Current Financial Crisis

No one can deny the outstanding success of the East Asian economies in the last two decades of rapid economic growth backed by surging capital inflows. Key questions posed by the current crisis are: what went wrong, and why? how to fix it? and, how to prevent a recurrence? To answer them, the article begins with a brief overview of recent developments in the miracle economies of East Asia, focusing mainly on Korea, Indonesia and Thailand. We focus too on some of the shadows that came to darken the glittering success story—on declining competitiveness and growing financial vulnerability; and on regulatory failures in banking. Then we take a leaf from Charles Kindleberger's book (1996) on Panics, Manias and Crashes and discuss—with historical precedents—various types of financial crisis: speculative attacks on pegged exchange rates, asset bubbles, stock market crashes and bank runs. Based on the distinction between illiquidity, due to a shortage of cash, and insolvency arising from a failure of economic prospects, we go on to outline three main views of the current crisis.First that it was simply due to reversal of capital flows, to a failure of collective action on the part of creditors which could and should have been solved by supplying extra liquidity—or by forcing creditors to roll over their loans. Second the view that the miracle had grown into a bubble that had finally had to burst: so the problem was essentially one of insolvency. Finally the view that we prefer, that the panic was not wholly groundless (and rescue efforts were bound to be difficult) mainly because weak regulation combined with implicit deposit guarantees had left local bankers free to gamble with the money that global capital markets had poured into their parlours. Panic set in when foreign depositors realised that there were not enough dollar reserves left for the guarantee to be credible. This account (championed most notably by Paul Krugman of MIT) involves both illiquidity and insolvency and helps to explain why the IMF was unwilling simply to throw money at the problem.Why did the crisis spread like wildfire around the region? Was it because a bank run due to shaky fundamentals in one country was imitated elsewhere, as investors joined the herd heading for the exit? This and other accounts of contagion are discussed before turning to ideas for crisis prevention and management, and a brief account of future prospects for the region. The article concludes by outlining immediate steps to resolve the current financial crisis and by proposing international monetary reforms to prevent a recurrence.

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