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Emil Verner @emilverner.bsky.social · 01/10/2026

...combined with substantial depositor losses suggests "sleepy depositors" and illiquid zombie banks. You see this in the slow death of many banks. The 1933 bank holiday closures is a striking example of this (more to come on this). This also helps understand the limited role NF run-induced failures

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Emil Verner @emilverner.bsky.social · 01/10/2026

Good q. It's not directly possible. Most banks are not publicly traded, and the value of their assets is opaque. However, there is indirect evidence of insolvent but liquid banks surviving for longer than one might expect. In particular, the high predictability of runs/failures...

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Emil Verner @emilverner.bsky.social · 30/09/2026

Agreed! Here is the "cause of failure" from the OCC bank examiners for national bank examiners, including in the OCC's Annual Report to Congress. Fraud is #3!

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Emil Verner @emilverner.bsky.social · 30/09/2026

The whole agenda has been underway for over half a decade. The runs database took us a couple of years, but it is still in progress. The cost of building these datasets has fallen drastically over the past few years, and we are constantly refining the pipeline

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Emil Verner @emilverner.bsky.social · 30/09/2026

Thanks a lot again. I hope these responses, albeit short given the format, clarify our views a bit... Our Annual Review piece tries to spell out the nuances and subtleties :) www.annualreviews.org/content/jour...

annualreviews.org

Bank Failures: The Roles of Solvency and Liquidity

Bank failures can stem from runs on otherwise solvent banks or from losses that render banks insolvent, regardless of withdrawals. Disentangling the relative importance of liquidity and solvency in ex...

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Emil Verner @emilverner.bsky.social · 30/09/2026

I agree with the point that the threat of runs changed behavior--for good (discipline, to some extent) and bad (liquidity hoarding). Our basic point is that, conditional on this equilibrium, runs on solvent banks were a rare cause of failure. But runs often triggered failure of insolvent banks.

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Emil Verner @emilverner.bsky.social · 30/09/2026

On the "non-fundamental runs" sample in our bank runs paper, this is meant to be an affirmative sample of runs where we can confidently say they were caused by non-fundamental reasons, not a complete census. We indeed show that strong banks could be subject to runs, but they usually survived.

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Emil Verner @emilverner.bsky.social · 30/09/2026

To address this harder question of (ii), in Failing Banks we analyze recovery rates on assets/deposits to ex ante leverage. Under assumptions about value destruction of receivership, this tells us the share of ex ante solvent banks that were run and failed. We find this share is modest but not zero.

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Emil Verner @emilverner.bsky.social · 30/09/2026

On (i) "fundamentals vs non-fundamental" and (ii) "solvency vs liquidity." We show that bank failures and runs are predictable by weak fundamentals. But as you say this doesn't prove solvency/insolvency. It could be consistent with fundamental-based panic runs or runs killing insolvent banks.

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Emil Verner @emilverner.bsky.social · 30/09/2026

Thanks for the great comments. A few quick thoughts. We agree that other mechanisms, such as interbank cooperation/clearinghouses are part of the reason for breaking the pass-through from runs to failure for strong banks, shrinking the "panic region." We have some evidence and theory on this.

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Christopher M. Meissner @chris-meissner.bsky.social · 02/01/2025

If you're in SF for the ASSA meetings, why not come to our session on international trade in history on Friday at 230 PM? www.aeaweb.org/conference/2...

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Sean Higgins @seankhiggins.bsky.social · 02/01/2025

Come to my #ASSA2025 session on #Finance #Development and #Growth! Presenters: Muhammad Meki Nishant Vats @emilverner.bsky.social Rebecca De Simone Discussants: Gautam Rao @raissafabregas.bsky.social Kristina Manysheva @sumudu.bsky.social www.aeaweb.org/conference/2... #EconSky #EconConf

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Emil Verner @emilverner.bsky.social · 13/12/2024

I suspect the answer is yes. DI often implemented or expanded in response to crises. www.imf.org/external/pub...

imf.org

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Emil Verner @emilverner.bsky.social · 13/12/2024

Here is an interesting figure from Demirguc-Kunt et al on the adoption of deposit insurance over time across countries. US was much earlier than other countries in adopting federal deposit insurance (and some US state banking systems experimented earlier). DI is relatively recent in most countries.

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Emil Verner @emilverner.bsky.social · 13/12/2024

The basic message of Failing Banks, though, is that runs on solvent banks seem to be a quite rare cause of failure before DI. This was also the view at the time at the Fed/OCC. For example, the OCC bank examiners rarely cite runs as the cause of failure (even though failures many involved runs)

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Emil Verner @emilverner.bsky.social · 13/12/2024

Yes, you exactly right. The motivation for the FDIC Improvement Act seemed to suggest many believed it went too far (and most people agree I think)

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Emil Verner @emilverner.bsky.social · 13/12/2024

In fact, we have a new paper (to be released soon) showing that improved supervision accelerates bank closures of unviable banks in the GFC, in line with this story.

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Emil Verner @emilverner.bsky.social · 13/12/2024

I think these channels matter, esp for the timing of failure but perhaps not the overall rate. Take the S&L crisis. DI + forbearance meant that failures were delayed a lot. Some banks gambled and a few maybe even got lucky and survived, but overall most unviable banks eventually failed.

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Emil Verner @emilverner.bsky.social · 13/12/2024

In short, yes, but with some nuances. For example, DI does affect exactly how banks fail, and removing DI would imply more role for market discipline to close insolvent banks (eg no insured deposit run-in), as opposed to supervisory closures (or forbearance).

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Emil Verner @emilverner.bsky.social · 13/12/2024

I'm not sure exactly what their political playbook or ultimate aim is. But just taking this idea at face value for a second, there are lots of potentially reasonable arguments for consolidating regulatory authorities www.marketplace.org/2018/03/19/w...

marketplace.org

Does the U.S. have too many financial regulators? - Marketplace

The fragmented system is one reason why the 2008 crisis was so bad, experts say.

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Emil Verner @emilverner.bsky.social · 13/12/2024

Your tweet says: "Bank runs don't exist anyway"

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Emil Verner @emilverner.bsky.social · 13/12/2024

To be clear, that's not exaaaaactly what we find or claim. See figure below. But certainly our paper suggests that preventing run-induced failures of solvent banks is not an important benefit of deposit insurance (there are likely other benefits... and some costs...)

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Emil Verner @emilverner.bsky.social · 09/12/2024

Thank you @petercontibrown.bsky.social for featuring our paper on Failing Banks in your PCB Central blog!

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Ben Moll @benmoll.bsky.social · 29/11/2024

New paper: benjaminmoll.com/challenge/

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Emil Verner @emilverner.bsky.social · 28/11/2024

It must be the only bird named after not one but two countries (Turkey and Peru in Portuguese)!

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WuTangIsForTheChildren @wutangforchildren.bsky.social · 26/11/2024

Remember when "Ferris Bueller's Day Off" tried to teach us about tariffs and no one was paying attention

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Cameron LaPoint @cslapoint.bsky.social · 27/11/2024

Excited to debut my new paper, "Housing Is the Financial Cycle: Evidence from 100 Years of Local Building Permits,” joint with @cortesgustavos.bsky.social. We document that building permits predict financial market volatility across a century of U.S. economic history. papers.ssrn.com/abstract=485...

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Emil Verner @emilverner.bsky.social · 27/11/2024

I am less sanguine than the article above about providing unlimited deposit insurance. Insured deposits tend to flow into failing banks (see blue line below). With full insurance, there is even more onus on supervisors to close failing banks and prevent moral hazard.

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Emil Verner @emilverner.bsky.social · 27/11/2024

This is closer to depositor loss rates for historical (pre-FDIC failures), which were initially around 60 cents on the $, but fell to 30-35 cents on the $ in receivership

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Emil Verner @emilverner.bsky.social · 27/11/2024

Uninsured depositors in a recent bank failure i Oklahoma set to lose 50 cents on the $ (though this may fall over time)-- much higher than the typical loss rate of 6 cents on the $ for bank failures since 1992. www.ft.com/content/91c7...

ft.com

A tiny Oklahoma bank failure reveals double standard in depositor bailouts

Small-town customers should get the same treatment as their well-connected peers in Silicon Valley

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