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Bank deposits and credit as sources of systemic risk

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  • Robert A. Eisenbeis

Abstract

There is little agreement on even the rudimentary definitions of a financial crisis, the sequence of events constituting a crisis, or the causes of these events. This article investigates the various theories of financial panics and crises with particular emphasis on the links between credit and deposits. ; The survey suggests that panics are not perfectly predictable, as some theories may suggest, but neither are they random events. Information asymmetries about banks ability to liquefy deposits were apparently a major contributing factor to banking panics in the past. In addition, financial crises do not seem to have been primary causal agents of recessions. The analysis also suggests that government policies can affect the likelihood of a financial crisis as well as play a role in its solution. The article raises a cautionary note that the dynamics of crises may differ significantly going forward given recent, rapidly developing changes in the U.S. and world financial system.

Suggested Citation

  • Robert A. Eisenbeis, 1997. "Bank deposits and credit as sources of systemic risk," Economic Review, Federal Reserve Bank of Atlanta, vol. 82(Q 3), pages 4-19.
    • Handle: RePEc:fip:fedaer:y:1997:i:q3:p:4-19:n:v.82no.3
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    References listed on IDEAS

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    1. R. Glenn Hubbard, 1991. "Financial Markets and Financial Crises," NBER Books, National Bureau of Economic Research, Inc, number glen91-1, March.
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    Cited by:

    1. William C. Hunter & David A. Marshall, 1999. "Thoughts on financial derivatives, systematic risk, and central banking: a review of some recent developments," Working Paper Series WP-99-20, Federal Reserve Bank of Chicago.
    2. Robert A. Eisenbeis & Larry D. Wall, 2002. "Reforming deposit insurance and FDICIA," Economic Review, Federal Reserve Bank of Atlanta, vol. 87(Q1), pages 1-16.
    3. Robert A. Eisenbeis & Larry D. Wall, 2002. "The major supervisory initiatives post-FDICIA: Are they based on the goals of PCA? Should they be?," FRB Atlanta Working Paper 2002-31, Federal Reserve Bank of Atlanta.
    4. Ijaz Hussain, 2017. "Corporate Financial Leverage, Asset Utilization and Nonperforming Loans in Pakistan," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 22(1), pages 37-70, Jan-June.

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