Supervision & Ratings
Bank Failures
Also known as Failures
A bank failure occurs when a regulator closes an insolvent or critically undercapitalized bank and appoints the FDIC as receiver. Failures cluster in credit and rate crises and are the ultimate outcome the safety-and-soundness metrics try to predict.
Formula
Banks rarely fail for one reason. The classic pattern is eroding capital and asset quality (the 2008-2010 CRE/construction wave) or a liquidity run on a bank with heavy uninsured deposits and unrealized securities losses (2023). The FDIC publishes every failure and its resolution.
Why it matters
Failures impose losses on the Deposit Insurance Fund, uninsured depositors, and shareholders, and can spread contagion. Understanding the metrics that precede failure — capital, Texas ratio, liquidity, uninsured-deposit and unrealized-loss exposure — is the entire point of bank surveillance.
How to interpret
No single ratio predicts failure, but combinations do: a high Texas ratio with thin capital, or heavy uninsured deposits alongside large unrealized losses and weak liquidity. Read the failure-risk picture as a syndrome across capital, asset quality, and liquidity rather than one number.
Thresholds
| Range | Label | Interpretation |
|---|---|---|
| Strong across CAMELS | Low risk | Sound capital, asset quality, and liquidity. |
| Isolated weakness | Moderate | One pressured area, otherwise sound. |
| Multiple weak areas | Watch | Capital, credit, or liquidity stress building together. |
| Distress syndrome | Concern | Thin capital + poor asset quality or a liquidity/uninsured run profile. |
Worked example
Frequently asked
What happens when a bank fails?
Its chartering authority closes it and appoints the FDIC as receiver. The FDIC typically sells the deposits and assets to a healthy acquirer over a weekend, protecting insured depositors; uninsured depositors and shareholders may take losses.
Can bank failures be predicted from Call Report data?
Not with certainty, but the conditions that precede failure — weak capital, high Texas ratio, poor asset quality, heavy uninsured deposits, and large unrealized losses — are visible in Call Report data, which is what surveillance and failure-prediction models monitor.
Sources
- FDIC Failed Bank List
- FFIEC Call Report (predictive metrics)
See Failures across 4,335 US banks
BankRegReports ranks every FDIC-insured institution by Failures, refreshed quarterly within 48 hours of FFIEC release.