A bank failure occurs whenever

Question

Quizplus · Accepted Answer

A bank failure occurs when a bank cannot meet its financial obligations to pay its depositors and maintain its required level of reserves, leading to its insolvency and potential closure. Factors that may contribute to this include large deposit outflows or calling in of loans, but ultimately it is the inability to maintain its financial obligations that leads to a bank failure. Not being allowed to borrow from the Fed may exacerbate the situation, but it is not the sole determining factor.

A Bank Failure Occurs Whenever