What Net Worth Means for a Bank
A bank's net worth is the difference between its assets and liabilities. It represents the capital that would remain if the bank settled all obligations. Positive net worth signals a buffer against losses, while negative net worth means liabilities exceed assets.
Can a Bank's Net Worth Be Negative
Yes, a bank's net worth can be negative when loan losses, bad investments, or asset devaluations exceed its capital. This situation is often called insolvency or capital impairment. It can occur after large defaults, market crashes, or severe credit stress.
What Happens When Net Worth Turns Negative
Regulators may intervene, restrict operations, or require recapitalization. In severe cases, the bank can be closed or placed into receivership. Deposit insurance, such as FDIC coverage, helps protect depositors up to insured limits. For more on bank failures, see FDIC Failed Bank List.
