Bank Failures

Bank failures occur when a bank can no longer meet its financial obligations, often due to poor management, risky loans, or economic downturns. When liabilities (what it owes) exceed assets (what it owns), the bank may run out of money and cannot return depositors’ funds. To protect depositors and maintain stability, regulatory authorities typically step in by closing or seizing the bank, often paying insured deposits through a government-backed insurance fund. While bank failures can create disruptions, they are usually managed swiftly to ensure confidence in the financial system remains intact.