Download presentation
Presentation is loading. Please wait.
Published byGavin Edwards Modified over 9 years ago
1
Community Bank and Financial Crisis Carter Young & Chin Hwa Tan
2
Topic Overview What is a Community bank? Systemic Risk Bank Failure
3
Community Bank Strong relationship with the community Asset size less than $10 BILLION The primary source of lending for Small businesses Farms Bread-and-Butter banking Deposits Loans
4
Systemic Risk “The possibility that a triggering event, such as the failure of an individual firm, will seriously impair other firms or markets and harm the broader economy” Community banks were too small to be considered “systemically important”
5
Systemic Risk (cont.) Interconnectedness Dominos effect of bank failure Correspondent banking Benefit of using correspondent bank Achieve economies of scale Pool fed funds Loan participation
6
Systemic Risk (cont.) Silverton Bank, GA Closed by Office of the Comptroller of the Currency (OCC) Federal Deposit Insurance Corporation named as receiver TIB appointed as Operations Manager Bad lending practice cause Silverton Bank’s TIB manage to save all Silverton customers’ Fed Fund
7
Bank Failure 215 bank failures between January 25, 2008 and April 16 th, 2010 Only 7 Big banks fail Balance Sheet Asset Loans loan loss reserve ASC ASC 310-10-35-2 (allowance for doubtful accounts for their loan asset account) Liability deposits
8
Bank Failure (cont.) Reasons for banks failure Lack of diversity in lending Bad management and loan approval Subprime mortgages Prepaid Assessment Not another special assessment Purpose – Replenish FDIC’s Deposit Insurance Fund prepay 3 years worth of deposit insurance premiums at the end of 2009 ( $45 billion)
9
Bank Failure (cont.) Supervisory Capital Assessment Program (stress test) Usage of capital provides a cushion against the risk of failure provides the funds for bank operations promotes public confidence and reassures creditors provides funds for banks to create new services serves as a regulator of growth for banks
10
Bank Failure (cont.) Basel I Tier 1 (core) capital Tier 2 ( supplemental) capital Adequately capitalized bank should have A ratio of Tier 1 capital to risk-weighted assets of at least 4% and A ratio of total capital to total risk-weighted assets of at least 8%, Basel II Minimum capital requirements Supervisory review Greater public disclosure
11
Questions & Answers
Similar presentations
© 2025 SlidePlayer.com. Inc.
All rights reserved.