A zombie bank is an insolvent financial institution that is able to continue operating thanks to explicit or implicit support from the government.A zombie bank is an insolvent financial institution that is able to continue operating thanks to explicit or implicit support from the government.Zombie banks are kept afloat to prevent panic from spreading to healthier banks. The term zombie bank was first coined by Edward Kane of Boston College in 1987, in reference to the savings and loan crisis. Restoring zombie banks back to health can cost hundreds of billions of dollars, weigh on economic growth, and prevent investors from pursuing better opportunities elsewhere.Zombie banks have large amounts of nonperforming assets on their balance sheets and are kept afloat to prevent panic from spreading to healthier banks. Normally, a bank running at a significant loss will eventually be forced into bankruptcy, at which point its assets will be sold off to pay down as many debts as possible. That is unless they are bailed out by governments.Zombie banks are creatures of financial repression. When loans go bad, the capital flight takes hold and the value of assets plummet, central banks sometimes decide to keep debt-burdened banks, corporations, and households on life support, instead of allowing nature to take its course and creative destruction to do its work.Become a supporter of this podcast: https://www.spreaker.com/podcast/investment-terms--4432332/support.

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