List of Banking Crises: History and Lessons Learned

Banking crises have been a recurring theme throughout history, causing widespread economic damage and financial instability. The first major banking crisis occurred in 1690 in Scotland, when the Bank of Scotland failed due to a combination of factors including poor management and a lack of regulation.

The 1690 crisis was a wake-up call for governments and regulators, who began to take steps to prevent similar disasters from happening in the future. In the 18th century, the British government established the Bank of England, which became a model for central banks around the world.

One of the most significant banking crises in recent history was the 2008 global financial crisis, which was triggered by a housing market bubble in the United States. The crisis led to widespread job losses, home foreclosures, and a sharp decline in global economic output.

Banking crises have been a recurring phenomenon throughout history. The first recorded banking crisis was the Crisis of 1763, which started in Amsterdam and spread to Germany and Scandinavia.

The 19th century saw a string of banking crises, including the Panic of 1819, a U.S. recession with bank failures, and the Panic of 1825, a pervasive British recession in which many banks failed, nearly including the Bank of England.

Here are some notable banking crises from the 19th and 20th centuries:

The 19th century was a tumultuous time for banking, with numerous crises and panics that affected various countries.

The Panic of 1819 was the first major economic downturn in the United States, marked by widespread bank failures and a recession that lasted several years.

The Panic of 1825 was a severe British recession that brought many banks to the brink of collapse, including the Bank of England.

The Panic of 1837 was a devastating economic downturn in the United States, followed by a 5-year depression that had far-reaching consequences.

The Panic of 1847 was a significant economic crisis in the United Kingdom, causing widespread bank failures and economic hardship.

The Panic of 1857 was another major economic downturn in the United States, marked by widespread bank failures and a recession that lasted several years.

The Panic of 1866 was a severe economic crisis in Europe, causing widespread bank failures and economic hardship.

The Panic of 1873 was a major economic downturn in the United States, followed by a 4-year depression that had far-reaching consequences.

The Panic of 1884 was a significant economic crisis that affected both the United States and Europe, causing widespread bank failures and economic hardship.

The Panic of 1890 was a major economic crisis that mainly affected the United Kingdom and Argentina, causing widespread bank failures and economic hardship.

The Panic of 1893 was a severe economic downturn in the United States, marked by widespread bank failures and a recession that lasted several years.

Here's a brief timeline of some of the major banking crises of the 19th century:

Guaranty Bank was a Milwaukee-based bank that closed on May 5, 2017. It had $1 billion in assets, making it the seventh-biggest U.S. bank failure since 2014. First-Citizens Bank & Trust Company of Raleigh, North Carolina assumed all of Guaranty's deposits.

The closure of Guaranty Bank is a notable example of a bank failure in recent history.

Examples of banking crises have occurred in various countries and time periods. In most of the sample countries, the banking crisis occurred after a period of economic expansion and was associated with balance of payments problems and substantial changes in relative prices.

The banking crisis in the 21st century has seen its fair share of notable events. The subprime mortgage crisis in the U.S. starting in 2007, the 2008 United Kingdom bank rescue package, and the 2008-2009 Ukrainian financial crisis are just a few examples.

Some countries have experienced multiple banking crises, including the United Kingdom, which had two bank rescue packages in 2008 and 2009, and the United States, which experienced a banking crisis in 2023. Other countries, like Spain, faced a financial crisis from 2008-2014.

Here are some notable banking crises from around the world:

The 21st century has been marked by its fair share of financial crises, and it's essential to understand these examples to grasp the complexities of the global economy. The subprime mortgage crisis in the U.S. started in 2007 and had far-reaching consequences.

In the U.K., the government had to intervene with a bank rescue package in 2008, followed by another one in 2009. This was a response to the severe financial strain caused by the crisis.

The 2008-2009 Belgian financial crisis was another significant event, highlighting the interconnectedness of global economies. The crisis also affected Iceland, leading to a prolonged financial crisis from 2008-2011.

Russia experienced a Great Recession, and Ukraine faced a financial crisis from 2008-2009. These events demonstrate the ripple effect of economic downturns across the globe.

The 2008-2014 Spanish financial crisis was a prolonged one, affecting the country's economy for years. This was followed by the post-2008 Irish banking crisis, which had a lasting impact on the country's financial sector.

Here's a list of some notable financial crises in the 21st century:

These crises serve as a reminder of the importance of prudent financial management and the need for governments to intervene when necessary to prevent further economic damage.

The 2008 Global Financial Crisis is a prime example of a financial crisis that can have far-reaching effects. It was one of the deepest economic downturns in modern history.

A financial crisis can take many forms, but the 2008 crisis was largely caused by the bountiful issuance of sub-prime mortgages. These mortgages were frequently sold to investors on the secondary market, leading to bad debt and investor losses.

The crisis was triggered by the default of sub-prime mortgagors, who were unable to pay back their loans. This left secondary market investors scrambling, and ultimately led to the insolvency of many financial institutions.

The government bailouts that followed the crisis had a negative impact on the market, causing stocks to plummet. This created a global panic and unstable market.

The recent collapse of Signature Bank in 2023 is another example of a financial institution failing due to bad debt. Signature had $110.4 billion in assets at the time of its closure.

The failure of Signature Bank was part of a larger regional banking crisis. It highlights the importance of prudent lending practices and risk management in the financial sector.

The acquisition of Signature's deposits and loan portfolios by Flagstar Bank was a key step in resolving the crisis. This move helped to stabilize the market and prevent further panic.

Republic First was a Philadelphia-based bank that was forced to close on April 26, 2024, marking the first bank failure of the year in the U.S.

It had a significant presence with $6 billion in assets.

The bank's closure was a notable event, with Fulton Bank taking charge of almost all its deposits and assets.

This takeover was a result of the bank's failure, which was a major development in the banking industry.

Silicon Valley Bank's collapse on March 10, 2023, sent shockwaves through the financial industry, with $209 billion in assets at risk.

The FDIC quickly stepped in, entering into a purchase and assumption agreement with First Citizens Bank & Trust Company to take over Silicon Valley Bank's deposits and loans on March 26, 2023.

Silicon Valley Bank's failure was a major bank failure of the last few years, dwarfing the assets of Valley Bank, which had $456.4 million in assets when it failed in 2014.

The National Republic Bank of Chicago was shut down on October 24, 2014.

Its failure was notable, as it was the fifth bank failure in Illinois that year and the 16th in the country.

The bank's assets at the time of its closing were a significant $954.4 million.

Its deposits were taken over by the State Bank of Texas, providing a lifeline for its customers.

Doral was the fifth-largest bank failure of the last decade, with $5.9 billion in assets.

Regulators shuttered San Juan, Puerto Rico-based Doral Bank on February 27, 2015, following eight straight years of losses and a murder investigation.

Banco Popular de Puerto Rico accepted all deposits from Doral Bank, and reached separate agreements to transfer deposits and assets in specific markets to a number of financial institutions across the U.S.

The closure of Doral Bank was a significant event, marking a turning point for the bank and its customers.

First Republic was a significant player in the 2023 regional banking crisis. It was shuttered by regulators on May 1, 2023.

The bank held a massive $229.1 billion in assets, making it a major institution in the US financial system. Its failure marked the end of the crisis.

JPMorgan Chase acquired all of First Republic's deposits and almost all of its assets. This was a significant move, as it helped to stabilize the financial system and prevent further instability.

The bank's failure was a major event, with far-reaching consequences for the US economy and financial system.

A financial crisis can occur when institutions or assets are overvalued, and irrational investor behavior is involved. This can lead to a rapid selloff, causing asset prices to drop and prompting individuals to withdraw their savings.

Systemic failures, unanticipated human behavior, and regulatory absence or failures can all contribute to a financial crisis. In the case of the 2008 financial crisis, the widespread issuance of sub-prime mortgages played a significant role in causing the crisis.

The role of credit market conditions in crises can also be a contributing factor. In some countries, such as Argentina and Chile, high real lending rates exacerbated the crisis, while in others, like the Philippines, credit rationing by bankers due to increased riskiness in lending was a major issue.

Here's a breakdown of the change in real credit balances of the sample countries:

A financial crisis can have multiple causes, and it's not always easy to pinpoint a single reason. Generally, a crisis can occur if institutions or assets are overvalued and exacerbated by irrational or herd-like investor behavior.

One of the main causes of a financial crisis is systemic failures, which can be caused by regulatory absence or failures. This can lead to a crisis that can cause an economy to go into a recession or depression.

The 2008 financial crisis was largely due to the bountiful issuance of sub-prime mortgages, which were frequently sold to investors on the secondary market. This led to bad debt, as sub-prime mortgagors defaulted on their loans, leaving secondary market investors scrambling.

In some cases, a financial crisis can be caused by a rapid string of selloffs, which can result in lower asset prices, prompting individuals to dump assets or make huge savings withdrawals. This can create a self-reinforcing cycle of fear and panic.

The Community Development Act of the 1970s required banks to loosen their credit requirements for lower-income consumers, creating a market for subprime mortgages. This led to a housing boom, which drove speculation, pushing up housing prices and creating a real estate bubble.

Here are some common factors that can contribute to a financial crisis:

These factors can interact with each other in complex ways, making it difficult to predict when a crisis will occur. However, by understanding the underlying causes and factors, we can take steps to mitigate the risk of a financial crisis.

Investment banks created complex financial instruments like collateralized debt obligations (CDOs) from mortgages purchased on the secondary market.

These CDOs bundled subprime mortgages with prime mortgages, making it impossible for investors to understand the associated risks.

The housing bubble that had been building for several years finally burst as the market for CDOs heated up.

Subprime borrowers began defaulting on loans worth more than their homes, accelerating the decline in housing prices.

The decline in housing prices was a direct result of the subprime borrowers defaulting on their loans.