Learn from past mistakes – “Postmortems” on failed institutions are instructive for community banks

Description

Abstract: In the aftermath of three notable bank failures in 2023, federal banking regulators issued comprehensive reports detailing the underlying causes of those failures. The reports point out management shortcomings that led to the bank failures — as well as regulators’ plans to become more proactive in addressing bank risks. This article showcases some highlights of the three reports. It also suggests that banks should expect greater regulatory scrutiny in the future, particularly with respect to capital, liquidity risk and interest rate risk. A sidebar addresses the role of social media in liquidity risk.