Banking 11 - A Reserve Bank Flashcards
1
Q
who do bank runs affect?
A
bank runs effect everyone
one irresponsible bank leads to other banks not being trusted
2
Q
what is a bank run?
A
when a large group of depositors withdraw at the same time
3
Q
why do bank runs occur?
A
depositors are fearful the bank will become insolvent
4
Q
what is a reserve bank?
A
act as the source of liquidity support of last resort when banks become illiquid
5
Q
purpose and role of reserve banks?
A
they regulate policies and store all reserves from financial institutions to bail out individual banks if they become illiquid
e.g., federal reserve
6
Q
are reserve banks synonymous with central banks?
A
yes
