Question

(D) Legal Risk
58. When the actions can lead to the entire financial system coming to a standstill, it is called
(A) Market risk
(B) Equity risk
(C) Business risk
(D) Systematic risk​

Answer 1

Explanation:

Systemic risk has been associated with a bank run which has a cascading effect on other banks which are owed money by the first bank in trouble, causing a cascading failure. As depositors sense the ripple effects of default, and liquidity concerns cascade through money markets, a panic can spread through a market, with a sudden flight to quality, creating many sellers but few buyers for illiquid assets. These interlinkages and the potential "clustering" of bank runs are the issues which policy makers consider when addressing the issue of protecting a system against systemic risk.[1][6] Governments and market monitoring institutions (such as the U.S. Securities