Knowra Financial crisis Financial crisis A disruption in financial institutions or markets that impairs credit and economic activity. It can spread through losses, funding shortages, falling asset prices, and weakened confidence.
Bank run : A rapid withdrawal of deposits from a bank by customers who fear it cannot meet its obligations. Withdrawals can force otherwise viable banks to sell assets or suspend payments.
Panic of 1907 : A United States financial panic in 1907 marked by bank runs, trust-company failures, and a severe contraction in credit. Its private rescue efforts helped build support for a permanent central bank.
Fractional-reserve banking : A banking system in which institutions hold only part of customers’ deposits as reserves and lend the rest. The mismatch between withdrawable deposits and longer-term loans makes confidence central to stability.
Recession : A significant decline in economic activity across an economy, commonly measured through output, employment, and income. A recession can occur without a financial breakdown, while a crisis often makes one more severe.
Liquidity crisis : A shortage of cash or readily saleable assets that prevents an institution or market from meeting near-term obligations. Funding can vanish even when borrowers or institutions remain solvent on paper.
Great Depression : A worldwide economic collapse beginning in 1929, marked by mass unemployment, bank failures, and prolonged deflation. Banking panics and monetary contraction turned market losses into a decade-long depression.
Leverage (finance) : The use of borrowed funds to increase the size of an investment or institution’s asset holdings relative to its capital. High leverage magnifies both gains and losses when asset values shift.
Sovereign debt crisis : A situation in which a national government struggles to service or refinance its debt. It is a specific crisis type centered on government borrowing rather than financial markets generally.
Credit crunch : A sharp reduction in the availability of loans, often accompanied by higher borrowing costs. Financial distress reaches businesses and households when lenders restrict new credit.
Savings and loan crisis : A United States crisis in the 1980s and early 1990s involving widespread failures of savings and loan institutions. Deregulation, interest-rate pressures, and risky lending produced major institutional losses.
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