Banking Awareness - Banking Acts, Reforms & Risk Management
A sudden run on a bank due to rumours leads to cash shortages. This is an example of:
A sudden run on a bank due to rumours leads to cash shortages. This is an example of:
medium Q7 of 15
Step-by-Step Solution
Step 1: Identify the immediate effect
Mass withdrawals create a shortage of liquid funds.Step 2: Match with risk type
Inability to meet withdrawal demands is liquidity risk.Final Answer:
Liquidity risk → Option CQuick Check:
Bank run causes liquidity stress ✅
Quick Trick: Sudden withdrawals = Liquidity risk.
Common Mistakes:
MISTAKES- Treating bank runs as market risk only.
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