There are three major categories of problems that can cause bank instability. In his article "A Tale of Two Crises"  Bloomberg's John Authers tells us that they are: a liquidity crisis- When customers pull their money out. a solvency crisis- When borrowers can fail to repay their loans. a confidence crisis- When shareholders sell the bank's stock, sending their shares down making it harder to raise money. And beyond true crises, changes in economic and financial conditions can attack their profits — which is bad for shareholders and ultimately might tend to imperil everyone connected to the bank. Understanding a Liquidity Crisis One of the primary causes of a Liquidity … [Read more...]