Continental Illinois National Bank

Paper Summary:

The purpose of this work is to show whether or not Continental Illinois rescue and restructuring efforts were successful and if so, why. The paper also attempts to discover if the decision to restructure was justified and explains why or why not. Furthermore, this work attempts to discover to what extent did the OCC contribute to the management failing of Chairman and CEO, Mr. Roger E. Anderson and the management team of Continental Illinois and what short and long-term benefits were expected from appointing David Taylor as the new CEO and Edward Bottum as President in the run-up to the restructuring of Continental Illinois. Finally, the current status of Continental Illinois is is examined as well the main sectors of banking and how these sectors have changed since the collapse of Continental Illinois National Bank and Trust Company.

Introduction
Background and Overview of Continental
Results of the Method used by FDIC in the Rescue
Critics Opinion of the Open Bank Assistance
Summary and Conclusion

From the Paper:

"Continental employed over 12,000 and held the approximate amount of $40 billion in assets. In May of 1984, at the time of near collapse the company had office in 14 states as well as 29 foreign countries with offices numbering 57. During the years 1976 and 1981 CCI experienced a jump in lending from $5 billion to over $14 billion with the company's total assets increasing from $21.5 billion to $45 billion with the loans-to-assets ration increasing from 57.9 percent to 68.8 percent between 1977 and 1981. The organizations return on assets stayed at 0.5 percent during the same time span and the return on equity was approximately 14.4 percent during those same years. (FDIC, 1997) The problems came under notice during 1982 when the Penn Square Bank, N.A. in Okalahoma City closed. The loans were underwritten poorly and it was clear that Continental had not used due diligence on the purchasing of the loans as well as Continental's loan portfolio beginning to experience problems specifically in the energy sector. It was reported by Continental in the second quarter of 1982 an amount of $1.3 billion in loans and assets that were 'nonperforming.'"

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