Principles of Macroeconomics / Unit 11 MAC 1020 short lesson, about 20 seconds
How Banks Fail
Captions available
The idea
Two things sink a bank. Unexpected defaults cut the value of its loans below what the balance sheet assumed. Or a maturity mismatch bites: deposits can leave at once while loans repay over decades.
In practice
Diversifying loans across customers, industries and regions defends against the first.
Where people slip
A broad recession defeats diversification, because the losses arrive together.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
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