Primer: American Bank Insolvency Losses — Brian Romanchuk

 In this article, I am going to give a basic introduction to insolvency (bankruptcy), as well as a discussion of the principles of how losses are apportioned to the various classes of creditors of American banks. I will only attempt to look at American banks since bankruptcy procedures are specific to each legal jurisdiction. Although I was not a credit analyst, I worked with them and had some training on the topic. The article “U.S. Corporate and Bank Insolvency Regimes: An Economic Comparison and Evaluation” by Robert R. Bliss and George G. Kaufman (URL: https://www.chicagofed.org/-/media/publications/working-papers/2006/wp2006-01-pdf.pdf) covers this topic, and I will use it to justify some assertions about the procedures. I will then discuss some of the issues of the resolution of Silicon Valley Bank, which is underway at the time of writing....

Bond Economics
Primer: American Bank Insolvency Losses
Brian Romanchuk