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Bankruptcy – the consequence of defective bank management

Author(s): Imola DRIGA | Dorina NITA

Journal: Economia : Seria Management
ISSN 1454-0320

Volume: 12;
Issue: 2;
Start page: 205;
Date: 2009;
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Keywords: insolvency risk | bank failures | systemic risk | bank regulation

Bank failure is the result of a defective management in banking leading the bank to a stage of bankruptcy, which means that the insolvent bank is going to be closed by the banking authority. In general, the banking sector is viewed as more vulnerable to contagion than other industries since banks are viewed as more susceptible to failures. Thus, the paper addresses the issue of bank insolvency as an extreme consequence of materialized risks, resulting in a payment disability for the bank. The paper presents the causes and consequences of bankruptcy and analysis the situation of bankruptcies in the Romanian banking system which was confronted with a number of bankruptcies beginning with 1994 and involving several significant financial institutions.

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