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Systemic Banking Crisis
A systemic banking crisis occurs when a large portion of the banking system becomes insolvent or illiquid.
Meaning in Practice
It typically involves widespread bank failures, deposit withdrawals, and credit contraction. Government intervention and central bank support are often required.
Why It Matters
Systemic crises threaten economic stability and require large-scale policy responses. They can lead to long-lasting economic downturns.
Market Impact
Bank stocks decline sharply, credit markets freeze, and risk premiums surge. Investor confidence deteriorates rapidly.
Example
During a banking crisis, multiple major banks require recapitalization or resolution to prevent collapse.
Related Terms
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