Loading the player...

DEFINITION of 'Zombie Bank'

A bank or financial institution with negative net worth. Although zombie banks typically have a net worth below zero, they continue to operate as a result of government backings or bailouts that allow these banks to meet debt obligations and avoid bankruptcy. Zombie banks often have a large amount of nonperforming assets on their balance sheets, which make future earnings very unpredictable.

BREAKING DOWN 'Zombie Bank'

The term "zombie bank" was first coined in 1987 to explain the savings and loan crisis that led to a large number of financial institutions declaring bankruptcy. Quite often, when a bank is deemed a zombie bank, customers will flood the institution in a bank run, only worsening the situation. This was seen during the financial crisis of 2008-2009, in which a large number of national and regional banks became insolvent and forced the U.S. government to issue a bailout package to keep the financial sector afloat.

RELATED TERMS
  1. Zombies

    Companies that continue to operate even though they are insolvent ...
  2. Zombie Foreclosure

    A situation (or a home in this situation) that occurs when a ...
  3. Zombie Title

    A right to ownership and possession of a home that remains with ...
  4. Bailout

    A situation in which a business, individual or government offers ...
  5. Too Big To Fail

    The idea that a business has become so large and ingrained in ...
  6. Bad Bank

    A bank set up to buy the bad loans of a bank with significant ...
Related Articles
  1. Insights

    Pride and Prejudice and Zombies and the 99%

    Vampires have money. Zombies and zombie-hunters are basically everybody else.
  2. Personal Finance

    Dawn Of The Zombie Debt

    Are old debts coming back to haunt you? We'll show you how to keep these zombies from eating you alive.
  3. Investing

    Don't Get Trapped in a Zombie Foreclosure

    Understand how foreclosures work and you can avoid the disastrous consequences of having a zombie foreclosure.
  4. Personal Finance

    How To Beat Off A Zombie Debt Collector

    Sounds like a bad horror movie, but it really could happen to you. Here's how to identify zombie debt and send collectors back to the dead-debt graveyard.
  5. Insurance

    Haunting Wall Street: The Halloween Terminology Of Investing

    Beware of zombies and Jekyll and Hyde companies! Read about the spooky terms circulating Wall Street.
  6. Insights

    The World's Top 10 Banks

    Learn more about the world's largest banks and how more financial power shifts eastward as China is home to four of the world's largest banks.
  7. Personal Finance

    Banking Has Changed: What Does It Mean For Consumers?

    Banks have long been leading spenders on technological innovations. Learn the key changes in the banking industry and what institution is right for you.
  8. Insurance

    From Booms To Bailouts: The Banking Crisis Of The 1980s

    The economic environment of the late 1970s and early 1980s created the perfect storm for a banking crisis.
RELATED FAQS
  1. What is the average profit margin for a company in the banking sector?

    Learn what the average profit margin is for companies in the banking sector, along with other evaluation metrics often used ... Read Answer >>
  2. What is the long-term outlook of the banking sector?

    Find out about the long-term outlook for the banking sector. It has significantly changed after legislation that passed in ... Read Answer >>
  3. What factors are the primary drivers of banks' share prices?

    Find out which factors are most important when determining the share price of banks and other lending institutions in the ... Read Answer >>
  4. What are the major categories of financial institutions and what are their primary ...

    Understand the various types of financial institutions that exist in today's economy, and learn the purpose each serves in ... Read Answer >>
  5. How does investment banking differ from commercial banking?

    Discover how investment banking differs from commercial banking, the responsibilities of each and how the two can be combined ... Read Answer >>
  6. What developed countries have the highest concentration in the banking sector?

    Learn about the developed countries that have the greatest concentration in the banking sector and the most important emerging ... Read Answer >>
Hot Definitions
  1. Fixed-Income Security

    An investment that provides a return in the form of fixed periodic payments and the eventual return of principal at maturity. ...
  2. Free Cash Flow - FCF

    A measure of financial performance calculated as operating cash flow minus capital expenditures. Free cash flow (FCF) represents ...
  3. Leverage Ratio

    Any ratio used to calculate the financial leverage of a company to get an idea of the company's methods of financing or to ...
  4. Two And Twenty

    A type of compensation structure that hedge fund managers typically employ in which part of compensation is performance based. ...
  5. Market Capitalization

    The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying ...
  6. Expense Ratio

    A measure of what it costs an investment company to operate a mutual fund. An expense ratio is determined through an annual ...
Trading Center