When Bank-A fails and it has borrowed from Bank-B:
A)the assets of Bank-B fall and Bank-B also risks insolvency.
B)all Bank-A's deposits are usually covered by deposit insurance.
C)Bank-B generally forgives the debt.
D)Bank-B will buy Bank-A's outstanding debt.

Question

Quizplus · Accepted Answer

When Bank-A fails and it has borrowed from Bank-B, Bank-B's assets may fall and it also risks insolvency. This is because if Bank-A is unable to repay its debt, Bank-B's loan becomes a non-performing asset, which can impact its financial health.

When Bank-A Fails and It Has Borrowed from Bank-B