Question

Systemic risk is the risk due to

A Failure of a bank due to non-compliance with regulations Correct Answer Incorrect Answer
B Contagion effect leading to failure of a group of banks Correct Answer Incorrect Answer
C Bankruptcy of one bank leading to failure of few more banks Correct Answer Incorrect Answer
D Failure of a bank due to slippages in internal systems of the bank Correct Answer Incorrect Answer
E Failure of entire banking system Correct Answer Incorrect Answer

Solution

Systemic risk refers to the risk of a breakdown of an entire system rather than simply the failure of individual parts. In a financial context, it denotes the risk of a cascading failure in the financial sector, caused by linkages within the financial system, resulting in a severe economic downturn

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