Commercial Bank Failures During the Great Recession: The Real (Estate) Story

57 Pages Posted: 9 Apr 2015

See all articles by Adonis Antoniades

Adonis Antoniades

National University of Singapore Business School

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Date Written: April 8, 2015

Abstract

The primary driver of commercial bank failures during the Great Recession was exposure to the real estate sector, not aggregate funding strains. The main "toxic" exposure was credit to non-household real estate borrowers, not traditional home mortgages or agency-issued MBS. Private-label MBS contributed to the failure of large banks only. Failed banks skewed their portfolios towards product categories that performed poorly on aggregate, and within each category invested in assets of lower quality than survivor banks did. They expanded more rapidly into real estate during the pre-crisis period, but rapid growth alone cannot explain differences in asset performance.

Keywords: bank failures, Great Recession, real estate, mortgage-backed securities, credit lines

JEL Classification: G21, G28

Suggested Citation

Antoniades, Adonis, Commercial Bank Failures During the Great Recession: The Real (Estate) Story (April 8, 2015). ECB Working Paper No. 1779, Available at SSRN: https://ssrn.com/abstract=2591851

Adonis Antoniades (Contact Author)

National University of Singapore Business School ( email )

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