An insolvent bank is one that:
A) borrows in the market for federal funds.
B) borrows at the discount window.
C) has more liabilities than assets.
D) sells in the open market.

Question

Quizplus · Accepted Answer

An insolvent bank is a bank that has more liabilities than assets, meaning that it owes more money to creditors and depositors than it has in assets such as loans and investments. A bank in this condition cannot pay its debts or meet its financial obligations, and may be forced to declare bankruptcy or seek a bailout. Borrowing in the market for federal funds or at the discount window or selling in the open market may be attempts to address liquidity issues, but do not necessarily indicate insolvency.

An Insolvent Bank Is One That