Implications of Bank Failures – Case Study:Daiwa Bank

The article presents a study which aims to analyze the reasons why banks have failed in the past and now the implications will be considered. Since banks are more closely interrtwined financially through lending and borrowing from each other, the failure of one bank is belived to spill the eeefct over on another bank. Therefore the banking system is more susceptible to systemic risk. The contagious effect in banking occurs faster, speads widely within the industry, results in a large number of bank failures, results in larger losses and can even spread to other countries, which might have a macroeconomic impact. In order to understand why banks have incurred heavy losses and loss of business, the example of Daiwa Bank, which had to close its US operation in 1995, and at presentis under the threat of closure of being nationalized, may be taken.