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Aggravating banking crises have been a. Uncertainties about the financial condition and liquidity of individual commercial...

Aggravating banking crises have been

a. Uncertainties about the financial condition and liquidity of individual commercial banks

b. Poorly chosen locations of banking offices

c. Conflicts between state and federal regulators

d. None of the above
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Answer #1

The correct answer is a. Uncertainties about the financial condition and liquidity of individual commercial banks.

This is the biggest reason for aggravating banking crises.

During bad financial condition, the prices of bank assets would have gone down and at the same time liquidity needs of individual commercial banks increase. This forces the banks to sell assets for a loss resulting in banking crisis.

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