The Sky is not the Limit Anymore

Abstract

Commercial banks are institutions that typically have a large percentage of their assets in the form of illiquid bank loans and a large percentage of their liabilities in deposits that are capable of being claimed. As a result of this, a sufficiently large deposit withdrawal may put a bank in a very difficult position. The failure of one major bank or other important financial institution is likely to cause sufficient uncertainty and loss of confidence by depositors and other creditors in other similar institutions that the adverse effects will spread in a domino fashion throughout the industry