Advanced Search
MyIDEAS: Login to save this article or follow this journal

The outlook for the U.S. banking industry : what does the experience of the 1980s and 1990s tell us?

Contents:

Author Info

  • Kenneth Spong
  • Richard J. Sullivan

Abstract

In many respects, the 1980s appear to be the worst decade in banking since the Great Depression, while the 1990s could be rated as the best. Over 1,100 commercial banks failed or needed FDIC assistance during the 1980s, and significant parts of the thrift industry became insolvent and had to be resolved, costing taxpayers $125 billion. In contrast, the banking industry began a dramatic recovery in the first half of 1990s and has recently achieved record profitability, extremely low levels of loan losses, and the highest capital ratios since the early 1940s. As a result, the number of banks failing during the second half of the 1990s has averaged only four or five per year.> These two divergent experiences raise the question of what will happen during the next decade. One obvious forecast would be for recent favorable trends to continue, particularly since banks and the underlying economy have shown remarkable strength and resiliency in their recovery from the 1980s. The current environment is not without some concerns, however. Consumer debt has reached record levels, and a few sectors, such as agriculture, show signs of weakness. Also, bank supervisors have recently voiced concerns that bank credit standards are weakening. Moreover, the financial environment is changing rapidly with innovation, bank expansion and consolidation, and competition from new sources, thus opening the door for new problems.> Spong and Sullivan examine the outlook for the banking industry over the next few years, focusing on whether the prosperity and tranquility of the 1990s will continue, or whether the industry faces a return of the banking problems of the 1980s. They find that, because banks are in much better shape now than in the 1980s, the industry is unlikely to face the depth of problems suffered in the 1980s even if the economic environment becomes less favorable. Still, it appears that banks will be hard pressed to match their recent record performance.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.kansascityfed.org/publicat/econrev/PDF/4q99spon.pdf
Download Restriction: no

Bibliographic Info

Article provided by Federal Reserve Bank of Kansas City in its journal Economic Review.

Volume (Year): (1999)
Issue (Month): Q IV ()
Pages: 65-83

as in new window
Handle: RePEc:fip:fedker:y:1999:i:qiv:p:65-83:n:v.84no.4

Contact details of provider:
Postal: One Memorial Drive, Kansas City, MO 64198
Phone: (816) 881-2254
Web page: http://www.kansascityfed.org
More information through EDIRC

Order Information:
Email:

Related research

Keywords: Banks and banking;

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Craig P. Aubuchon & David C. Wheelock, 2010. "The geographic distribution and characteristics of U.S. bank failures, 2007-2010: do bank failures still reflect local economic conditions?," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 395-415.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:fip:fedker:y:1999:i:qiv:p:65-83:n:v.84no.4. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (LDayrit).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.