What are the main determinants of bank failure Essay

What are the main determinants of bank failure - Essay Examplenew products and activities with little or no expertness or inadequate risk management controls Heavy reliance on broke release or agent legal proceeding to fuel growth Growth can be monitored a number of ways, such as the prowler Benchmark Ratios designed to assist field managers. An example is the increase of a banks total loans and leases beyond a threshold percentage from the same quarter of the previous year. Another category of red flags is the Deterioration in the Economy, since bank performance and economic conditions in the markets are closely correlated. Some common economic indicators are bankruptcies and business failures, employment, consumer delinquency rates, existing home prices, gross domestic products, income, inflation rates, interest rates, the trade deficit, wages, and so on. A third category is Management Oversight Deficiencies, which generally include indicators of management irresponsiveness, in efficiency, and non-compliance with laws and internal standards. The 4th category is Inappropriate Limits on OCC Access to Bank Staff and Documents, which comprise attempts of the bank to deny regulators the punctual and complete access to information. The include refusal to provide information within a reasonable time period, engagement of agents such as bank counsel to pre-screen requests for bank documents, alternation of records prior to examiner review, and unexplained disappearance of list records, among others. The OCC also looks out for these other categories of red flags Asset Quality Deterioration. Red flags include change magnitude levels of olden due and nonperforming loans as percent of loans, increasing level of Other Real Estate Owned (OREO), and increasing levels of interest earned not collected (IENC) as a percent of loans, among others. Strained Liquidity. Some red flags are low levels of on-hand liquidity, declines in core deposit levels, significant increas es