Operational risk is main cause of bank failures, says FDIC

Operational risk continues to be the root cause of bank failures, according to the Division of Resolutions and Receiverships at the Federal Deposit Insurance Corporation (FDIC), based in Washington DC.

The US regulator, whose primary purpose is to insure bank deposits, presented its findings at a recent symposium on ‘Lessons learned from bank failures’, held at the Southern Methodist University in Dallas.

In a paper titled ‘The Root Causes of Bank Failures’, the FDIC says causes of bank failure include managerial weaknesses, poor internal routines and controls, fraud and economic conditions. “The only factor in which bank management does not have control is the economic conditions, while