It is imperative that banks maintain a reputation for safety in order that
A)regulators can reduce their efforts.
B)bank runs can be reduced or prevented.
C)customers will not be afraid to ask for loans.
D)stockholders can earn a high rate of return.

Question

Quizplus · Accepted Answer

Maintaining a reputation for safety is crucial to reduce or prevent bank runs, where customers withdraw their deposits all at once, causing a liquidity crisis for the bank. By assuring customers that their deposits are safe, banks can prevent such events and ensure stability in the financial system.

It Is Imperative That Banks Maintain a Reputation for Safety