735 B
735 B
Bank Systemic Risk
Definition
The potential for problems in one bank or part of the banking system to spread throughout the entire financial system, potentially causing widespread economic disruption. This risk requires careful management and appropriate regulation.
Source Chapter
Book II, Chapter 2
Context
Smith analyses how problems in individual banks can spread through the banking system and affect the broader economy. He shows how systemic risk emerges from the interconnected nature of banking operations and the importance of prudent management.
Economic Domain
Regulation