1 FDIC, Failed Bank Cost Analysis 19861994 (1995), 12, 32.
2 At year-end 1984, only 24 commercial banks had more than $10 billion in assets; by year-end 1994, the number was 64.
During the same ten-year period, total assets at such banks had risen from $865 billion to $1.94 trillion.
Continental Illinois and
Too Big to Fail
One of the most notable features on the landscape of the banking crises of the 1980s
was the crisis involving Continental Illinois National Bank and Trust Company (CINB) in
May 1984, which was and still is the largest bank resolution in U.S. history. Although it
took place before the banking crises of the decade gathered strength, the Continental
episode is noteworthy because it focused attention on important banking policy issues of
the period. Among the most significant of these was the effectiveness of supervision: in the
wake of the banks difficulties, some members of Congress questioned whether bank regu-
lators (in this case, the Office of the Comptroller of the Currency in particular) could ade-
quately assess risk within an institution. The economic dislocation such a large bank failure
might bring also engendered increased scrutiny of the supervisory process. In addition,
Continental was a particularly telling example of the problem that bank regulators faced
when attempting to deal with safety-and-soundness issues in an institution that had already
been identified as taking excessive risks but whose performance had not yet been seriously
Continentals size alone made it consequential. Large-bank failures in the 1980s and
early 1990s would prove to have serious consequences for the Bank Insurance Fund (BIF).
For example, although only 1 percent of failed institutions from 1986 to 1994 had more
than $5 billion in assets, those banks made up 37 percent of the total assets of failed insti-
tutions and accounted for 23 percent of BIF losses during that period.1 Moreover, continu-
ing industry consolidation can only serve to make the issues inv