{
  "id": 17792300,
  "title": "How Do Banking Supervisors Deal with Failing Banks?",
  "url": "https://urgent.news/2026/11/02/how-do-banking-supervisors-deal-with-failing-banks",
  "topic": "finance",
  "section": "Finance & Markets",
  "published": "2026-11-02T12:00:00.000Z",
  "source": {
    "name": "Liberty Street Economics",
    "slug": "liberty-street-economics",
    "url": "https://libertystreeteconomics.newyorkfed.org/2026/11/how-do-banking-supervisors-deal-with-failing-banks/"
  },
  "original_language": "en",
  "account": "Bank closures are determined by supervisory decisions, rather than market forces. This is evident from the fact that most bank failures occur on Fridays, which is the Federal Deposit Insurance Corporation's preferred closure day. Once a bank has been closed, it is typically acquired by another bank, with the purchase often arranged before the formal closure takes place. This suggests that bank closures are primarily driven by supervisory decisions rather than market forces such as deposit withdrawals.\n\nHard information, such as reported book equity, plays a significant role in supervisory decisions to close troubled banks. Banks with low reported equity are more likely to be closed. For instance, banks with an equity-to-assets ratio of less than 2% have a 70% chance of being closed within the following year. Supervisors also consider the bank's composite CAMELS ratings, which assess the bank's financial health based on six criteria. A downgrade in these ratings often coincides with a deterioration in the bank's financial statements, indicating that supervisory actions aim to address and correct the underlying issues.",
  "summary": "In this post, we discuss insights from a recent staff report on the role of banking supervision in identifying and disciplining failing banks. We show that bank failures typically result from supervisory closure decisions based on hard information about book equity. Yet hard information is itself partly produced by supervision, as our evidence suggests that supervisors require troubled banks to…",
  "key_points": [],
  "editors_take": null,
  "illustration": null,
  "coverage": {
    "outlets": 1,
    "also_reported_by": []
  },
  "ai_generated": true,
  "disclaimer": "Summaries, key points and the editor’s take are written by software from other outlets’ reporting and may contain errors — always check the linked original."
}