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Are bank failures are or are not a sign of a relatively healthy industry?

Are bank failures are or are not a sign of a relatively healthy industry?

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Answer #1

Obviously, Bank Failures are not a sign of relatively healthy industry.

Bank Failures mainly occur due to defaults by many borrowers from the bank within the same time frame. That is default more than normal.

Such multiple defaults which lead to Banking Failures shows inability of Borrowers to repay the loans (rather than unwillingnessness to repay). Inability to repay is due to unhealthy industry conditions such as lower profits or cashflows, lower demand for product, etc..

Thus, Bank failures are not a sign of relatively healthy industry

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