If the value of a bank's liabilities is greater than its assets,there is a:
A) solvency crisis.
B) liquidity crisis.
C) liability crisis.
D) profitability crisis.

Question

Quizplus · Accepted Answer

If the value of a bank's liabilities is greater than its assets, it means the bank is insolvent - it cannot meet its obligations to its creditors or depositors. This is known as a solvency crisis. A liquidity crisis occurs when a bank is unable to meet its short-term obligations, even if its assets are greater than its liabilities. A liability crisis and a profitability crisis are not relevant in this context.

If the Value of a Bank's Liabilities Is Greater Than