Continental Illinois National Bank and Trust Company

From Wikipedia, the free encyclopedia

The Continental Illinois National Bank and Trust Company was at one time the seventh largest bank in the United States as measured by deposits. In May 1984, the bank became insolvent due to bad loans purchased from the failed Penn Square Bank N.A. of Oklahoma. This caused a substantial run on the bank's deposits once it became clear Continental Illinois was headed for failure. (In fact, large depositors withdrew over $10 billion of deposits in early May)

Continental Illinois was considered as too-big-to-fail at that time by regulatory agencies. The Fed and FDIC feared a failure may cause widespread financial trouble and instability. Regulators consequently in an effort to rescue the bank prevented the losses of virtually all deposit accounts and even bondholders. The FDIC infused $4.5 billion to rescue the bank. A willing merger partner has been searched for two months but could not be found. Eventually, the board of directors and top management have been removed. The Continental Illinois continued to exist.

To this day Continental Illinois is the largest ever U.S. bank to be bailed out by the FDIC and Fed.