GENERAL KNOWLEDGE

Detailed explanation-1: -In general, if a bank has insufficient liquidity (e.g., cash) and cannot convert enough assets to meet its obligations, it defaults. Regulators must then step in to ensure an orderly return of depositor funds and to mitigate a broader panic.

Detailed explanation-2: -A run on a bank occurs when a large number of depositors, fearing that their bank will be unable to repay their deposits in full and on time, simultaneously try to withdraw their funds immediately.

Detailed explanation-3: -Systemic banking crisis A bank run is the sudden withdrawal of deposits of just one bank. A banking panic or bank panic is a financial crisis that occurs when many banks suffer runs at the same time, as a cascading failure.

Detailed explanation-4: -Liquidity reflects a financial institution’s ability to fund assets and meet financial obligations. It is essential to meet customer withdrawals, compensate for balance sheet fluctuations, and provide funds for growth.