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Understanding the Components of Bank Failure Resolution Costs

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  • Rosalind L. Bennett
  • Haluk Unal

Abstract

In this paper, we demonstrate how the resolution costs associated with over 1,000 bank failures from 1986 to 2007 are distributed across the method of resolution, bank size, regulatory periods, and the existence of fraud. In addition, we document the time spent in the resolution by the resolution method and legislative period. Finally, we show how various classes of claimants against the failed banks bear the costs of the failure.

Suggested Citation

  • Rosalind L. Bennett & Haluk Unal, 2015. "Understanding the Components of Bank Failure Resolution Costs," Financial Markets, Institutions & Instruments, John Wiley & Sons, vol. 24(5), pages 349-389, December.
    • Handle: RePEc:wly:finmar:v:24:y:2015:i:5:p:349-389
    DOI: 10.1111/fmii.12031
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    References listed on IDEAS

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    1. Arturo Bris & Ivo Welch & Ning Zhu, 2006. "The Costs of Bankruptcy: Chapter 7 Liquidation versus Chapter 11 Reorganization," Journal of Finance, American Finance Association, vol. 61(3), pages 1253-1303, June.
    2. James, Christopher, 1991. "The Losses Realized in Bank Failures," Journal of Finance, American Finance Association, vol. 46(4), pages 1223-1242, September.
    3. Bennett, Rosalind L. & Unal, Haluk, 2014. "The effects of resolution methods and industry stress on the loss on assets from bank failures," Journal of Financial Stability, Elsevier, vol. 15(C), pages 18-31.
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    Cited by:

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    2. Abedifar, Pejman & Abdollahzadeh, Morteza & Tarazi, Amine & White, Lawrence J., 2024. "The sale of failed banks: The importance of their branch networks and of the acquirers’ financial strength," Journal of Financial Stability, Elsevier, vol. 75(C).
    3. Cyril Monnet, Dirk Niepelt, Remo Taudien, 2025. "Pricing Liquidity Support: A PLB for Switzerland," Diskussionsschriften dp2501, Universitaet Bern, Departement Volkswirtschaft.
    4. Ricardo Cabral, 2025. "The Banking Union’s resolution or liquidation approach," Journal of Banking Regulation, Palgrave Macmillan, vol. 26(2), pages 111-128, June.
    5. Spokeviciute, Laima & Jahanshahloo, Hossein & Keasey, Kevin & Vallascas, Francesco, 2025. "Three decades of failed bank acquisitions," Journal of Banking & Finance, Elsevier, vol. 170(C).
    6. Shy, Oz, 2025. "Faster bank runs," European Economic Review, Elsevier, vol. 172(C).
    7. Ikeda, Daisuke, 2024. "Bank runs, prudential tools and social welfare in a global game general equilibrium model," Journal of Financial Stability, Elsevier, vol. 72(C).
    8. Remo Isch-Taudien & Cyril Monnet & Dirk Niepelt, 2026. "Pricing liquidity support: a PLB for Switzerland," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 162(1), pages 1-19, December.
    9. Dirk Niepelt, 2024. "Money and Banking with Reserves and CBDC," Journal of Finance, American Finance Association, vol. 79(4), pages 2505-2552, August.

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