Banking Crises

Numerous banking crises have occurred across the globe over a period spanning more than 200 years. Although each may have had a unique trigger, these crises represent a systemic failure stemming from the collapses of one or more major banks. These financial disasters can devastate economies, with all stakeholders – bank owners and creditors, financial markets, and taxpayers – bearing the costs. An inherent tension exists between a bank’s requirement to hold cash to meet depositor demands and its need to get a better return by investing in yield-producing assets. Banks’ greed for yield often drives them to invest in assets...