During the 2007/08 financial crisis, the authorities feared that when a bank failed it would lead to contagion and cause the collapse of the global economy. It is why governments from around the world pumped money into the banking system and in the worst case scenarios, became leading shareholders, an example includes Royal Bank of Scotland. Over the last few months, we have seen evidence that banks no longer pose such a threat to the global economy, although individual banks do present a risk of failing. Therefore, the Basel III regulations seem to be working; regulations which aim to protect depositors and prevent systematic contagion.
In the last few months there has been one failing bank in Spain (Banco Popular) and two in Italy (Popolare di Vicenza and Veneto Banca), which is obviously not good news for the shareholders and the subordinated debtholders, however, there has been very little impact on the economy and markets.
With central banks, led by the US Federal Reserve, starting to look towards raising interest rates, at last the business environment for the banking sector is showing signs of improvement.