Working Papers :
An Illusory Feeling of Stability: Bank Failures in France in the 1920s (Forthcoming in European Review of Economic History)
This paper investigates the sources of bank failures in France between 1918 and 1928 using historical bank-level data. Failed banks were primarily constrained by liquidity rather than solvency: despite high capital ratios, these ratios did not ensure stability and encouraged greater exposure to risky and illiquid activities. When losses materialized or withdrawal requests intensified, banks were forced to default. Conversely, holdings of liquid assets are associated with a lower probability of failure, highlighting the protective role of liquidity buffers against adverse shocks.
JEL: G21, G32, G33
Keywords: Bank failures, Liquidity, Capital, Interwar France