Bank panic is the a series of unexpected cash withdrawals ca
Not what you're looking for?
Bank panic is the a series of unexpected cash withdrawals caused by a sudden decline in customers confidence or fear that the bank will close. Many depositors withdraw cash almost at the same time. Since the cash reserve a bank keeps on hand is only a small fraction of its deposits, a large number of withdrawals in a short period of time can deplete available cash and force the bank to close and possibly go out of business.
Two of the largest French banks, BNP Paribas and Crédit Agricole, where experince just that, bank panic. After reading the article, I understood that it was just a ploy by investers to sway the investment market. Rumers began to circulate that the banks were going under, because of that depositors begain pulling their money out of the banks. Once the banks took notice they begain to counter some of the rumers and began the see the business.
Turns out there was some cause to be concerned, with their personal investing in short-term loans they are at risk of freezes in credit markets, they also have a low liquidity ratio, which the banks are trying to change by adding depositors to move their money out of money market and into deposit accounts.
----Do you think the United States will have bank panic?
Purchase this Solution
Solution Summary
Bank panic is the a series of unexpected cash withdrawals caused by a sudden decline in customers confidence or fear that the bank will close. Many depositors withdraw cash almost at the same time. Since the cash reserve a bank keeps on hand is only a small fraction of its deposits, a large number of withdrawals in a short period of time can deplete available cash and force the bank to close and possibly go out of business.
Two of the largest French banks, BNP Paribas and Crédit Agricole, where experince just that, bank panic. After reading the article, I understood that it was just a ploy by investers to sway the investment market. Rumers began to circulate that the banks were going under, because of that depositors begain pulling their money out of the banks. Once the banks took notice they begain to counter some of the rumers and began the see the business.
Turns out there was some cause to be concerned, with their personal investing in short-term loans they are at risk of freezes in credit markets, they also have a low liquidity ratio, which the banks are trying to change by adding depositors to move their money out of money market and into deposit accounts.
----Do you think the United States will have bank panic?Bank panic is the a series of unexpected cash withdrawals caused by a sudden decline in customers confidence or fear that the bank will close. Many depositors withdraw cash almost at the same time. Since the cash reserve a bank keeps on hand is only a small fraction of its deposits, a large number of withdrawals in a short period of time can deplete available cash and force the bank to close and possibly go out of business.
Two of the largest French banks, BNP Paribas and Crédit Agricole, where experince just that, bank panic. After reading the article, I understood that it was just a ploy by investers to sway the investment market. Rumers began to circulate that the banks were going under, because of that depositors begain pulling their money out of the banks. Once the banks took notice they begain to counter some of the rumers and began the see the business.
Turns out there was some cause to be concerned, with their personal investing in short-term loans they are at risk of freezes in credit markets, they also have a low liquidity ratio, which the banks are trying to change by adding depositors to move their money out of money market and into deposit accounts.
----Do you think the United States will have bank panic?
Solution Preview
Actually, the U.S. saw a bank panic in 1907, shortly after the stock market crashed. I do not think that in the U.S. we will see a bank panic on the scale of what would qualify for actual panic. I do think we will continue to see people pull their money, deposits, and other investments away from banks as the economy fluctuates, much like what we saw a few years back, when we went into a temporary recession period. A high number of people pulled their money out, and the banks did fold - but not because the people pulled their ...
Purchase this Solution
Free BrainMass Quizzes
Balance Sheet
The Fundamental Classified Balance Sheet. What to know to make it easy.
Learning Lean
This quiz will help you understand the basic concepts of Lean.
Business Processes
This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.
Change and Resistance within Organizations
This quiz intended to help students understand change and resistance in organizations
Transformational Leadership
This quiz covers the topic of transformational leadership. Specifically, this quiz covers the theories proposed by James MacGregor Burns and Bernard Bass. Students familiar with transformational leadership should easily be able to answer the questions detailed below.