7-99 The risk that an FI may not have enough capital to offset a sudden decline in the value of its assets relative to its liabilities is referred to as

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Insolvency risk refers to the risk of an FI being unable to meet its financial obligations when they become due due to a decline in the value of its assets relative to its liabilities. This risk is closely related to the level of capital that the FI has. If the FI has insufficient capital, it may not be able to absorb losses, thereby increasing the risk of insolvency.

7-99 the Risk That an FI May Not Have Enough