Because of asymmetric information,the failure of one bank can lead to runs on other banks. This is the

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Asymmetric information can lead to the contagion effect, where the failure of one bank leads to runs on other banks due to a lack of information and uncertainty about the financial health of other institutions. The too-big-to-fail effect refers to the perception that some banks are so large and important that they will not be allowed to fail, creating a moral hazard problem where they take on excessive risk. Adverse selection problem is related to asymmetric information, but refers specifically to situations where one party in a transaction has more information than the other, leading to the potential for adverse outcomes.

Because of Asymmetric Information,the Failure of One Bank Can Lead