Shadow banks are not subject to runs.

Question

Quizplus · Accepted Answer

Shadow banks can be subject to runs, as they are non-bank financial intermediaries that engage in activities similar to traditional commercial banks, such as borrowing short-term and lending long-term. If investors and creditors lose confidence in their ability to repay their obligations, they can withdraw their funds en masse, leading to a liquidity crisis and potential insolvency. This was evident during the global financial crisis of 2008-2009, when several shadow banks, such as Lehman Brothers and AIG, experienced runs and had to be bailed out by the government or file for bankruptcy.

Shadow Banks Are Not Subject to Runs