Bank Insolvency
As we have discussed, banks receive intense regulatory attention because of the special role that they play in the macroeconomy and because banks offer a unique combination of services, lending long term while guaranteeing the liquidity of their liabilities. Despite this special regulatory treatment, banks fail. In the past 30 years, many countries with mature economies have experienced a significant crisis in the banking sector. In a 2004 study of bank failures in eight such countries (Germany, Japan, Norway, Spain, Sweden, Switzerland, the United Kingdom, and the United States), the Basel Committee observed some common trends:
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