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. Zombie ETF

    A zombie ETF refers to exchange traded funds that are seeing ...
  2. Zombie Title

    A right to ownership and possession of a home that remains with ...
  3. Bank

    A financial institution licensed as a receiver of deposits. There ...
  4. Too Big To Fail

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

    A bank set up to buy the bad loans of a bank with significant ...
  6. Bank Run

    A situation that occurs when a large number of bank or other ...
Related Articles
  1. Small Business

    The Curse Of Zombie Banks

    They may not eat brains, but zombie banks definitely hurt the economy. Find out more about this unstoppable horde.
  2. Insights

    Pride and Prejudice and Zombies and the 99%

    Vampires have money. Zombies and zombie-hunters are basically everybody else.
  3. 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.
  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. Personal Finance

    Retail Banking vs. Corporate Banking

    Retail banking is the visible face of banking to the general public. Corporate banking refers to the aspect of banking that deals with corporate customers.
  7. 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.
  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.
  9. Insights

    What Do the Federal Reserve Banks Do?

    These 12 regional banks are involved with four general tasks: formulate monetary policy, supervise financial institutions, facilitate government policy and provide payment services.
RELATED FAQS
  1. What is the banking sector?

    Why the banking sector is a vital industry, what it does to drive economic growth and examples of companies in this sector. 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. 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 >>
  4. 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 >>
  5. What are the main reasons an investor should consider an allocation to the banking ...

    Learn about investment opportunities in the commercial and investment banking industry. Find out why many investors choose ... Read Answer >>
  6. What's the difference between investment banks and commercial banks?

    Understand the principal differences between investment banks and commercial banks, and the areas of banking services that ... Read Answer >>
Hot Definitions
  1. Trustee

    A person or firm that holds or administers property or assets for the benefit of a third party. A trustee may be appointed ...
  2. Gross Domestic Product - GDP

    GDP is the monetary value of all the finished goods and services produced within a country's borders in a specific time period, ...
  3. Debt/Equity Ratio

    The D/E ratio indicates how much debt a company is using to finance its assets relative to the value of shareholders’ equity.
  4. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange.
  5. Net Present Value - NPV

    Net Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows ...
  6. Return On Equity - ROE

    The amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation's profitability ...
Trading Center