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1. What does the term "bank failure" mean? What role does FDIC insurance play?
Bank failure refers to the financial status of a bank when it becomes insolvent and is not in a position to meet its commitments to both creditors and depositors. The FDIC insurance helps to guarantee a minimal financial loss for the insured parties in case the bank fails. The scheme accomplishes this through facilitating a sale of the failed bank to another financial institution or initiating direct payouts to the clients.
2. How many banks failures occurred in the United States during the most recent complete calendar year?
Statistical data from the 2017 FY FDIC Bank Failure Report indicate that a total of eight banks failed in the US during that period. The failure subsequently led to a combined loss of over $ 1.1 Million in both assets and cash deposits in all the eight banks.
3. How many banks failures occurred in the United States during 2018?
In the current years, the FDIC bank failure report that so far, there is no single case of bank failure reported.
4. What were the total assets and total deposits held by the banks that failed during the most recent complete calendar year?
According to 2017 FDIC report, failed banks in that year held total assets and bank deposits valued at $ 6,530,700.
5. How many banks failed in 1937?
FDIC bank data and statistics report for the year 1937 shows that Seventy Five banking institutions failed in that year. At the time of failure, the combined total value of assets and cash deposits held by the banks amounted to $ 32,804,000 and $19,284,000 respectively.
6. How is it possible to prevent bank failure?
Bank failures are preventable by putting in place early intervention policy frameworks that guarantee failure detection. As such, early detection makes it easier for timely intervention by relevant agencies thereby preventing bank insolvency cases.
7. Reflection - Reflecting on specifically what they learned from the assignment and how they think they could apply what they learned in the workplace. (Hairstylist)
The assignment provides a variety of lessons applicable to a work environment such as good management practices, sound financial planning, and advantages of diversification. In most cases of bank failures, management overlooks the principle elements of risks and return leading to insolvency. Similarly, in a hairstylist workplace environment, it is important to ensure that all risks such as loans for expansion are repayable without affecting the cash-flow of the business. Moreover, it is important to diversify the product to minimize the risks of overall failure. The assignment further sheds light on the essence of proper planning and market research. Research ensures decisions about new ventures are evidence-based. An underlying similarity in all bank failure cases shows decision-making flaws that resulted in failure. Finally, the adoption of sound financial planning mechanisms is an integral aspect of business operations. Therefore applying them is essential to prevent insolvency for the hairstylist business organization.
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