A shadow bank may be subject to a bank run if:
A)its depositors withdraw their funds because they fear that it is financially unsound.
B)depositors decide that the FDIC insurance of $250,000 per account is insufficient to cover their potential losses.
C)they purchase too many government securities.
D)the shadow bank's lenders decide it is unsafe and stop lending it money.

Question

Quizplus · Accepted Answer

Shadow banks rely on short-term funding from lenders rather than deposits. If lenders decide the shadow bank is unsafe and stop lending, it can lead to a liquidity crisis similar to a bank run.

A Shadow Bank May Be Subject to a Bank Run