Definition of Financial crisis:
A situation in which the supply of money is outpaced by the demand for money. This means that liquidity is quickly evaporated because available money is withdrawn from banks, forcing banks either to sell other investments to make up for the shortfall or to collapse. See also recession.
A financial crisis may have multiple causes. Generally, a crisis can occur if institutions or assets are overvalued, and can be exacerbated by irrational or herd-like investor behavior. For example, a rapid string of selloffs can result in lower asset prices, prompting individuals to dump assets or make huge savings withdrawals when a bank failure is rumored.
In a financial crisis, asset prices see a steep decline in value, businesses and consumers are unable to pay their debts, and financial institutions experience liquidity shortages. A financial crisis is often associated with a panic or a bank run during which investors sell off assets or withdraw money from savings accounts because they fear that the value of those assets will drop if they remain in a financial institution. Other situations that may be labeled a financial crisis include the bursting of a speculative financial bubble, a stock market crash, a sovereign default, or a currency crisis. A financial crisis may be limited to banks or spread throughout a single economy, the economy of a region, or economies worldwide.
How to use Financial crisis in a sentence?
- The financial crisis experienced by the generation of businesses will never be forgotten so we are learning from our past.
- A financial crisis may be limited to a single country or one segment of financial services, but is more likely to spread regionally or globally.
- If your business is ever in a financial crisis you may need to call on some favors and hope you can get the help you need.
- My family was experiencing a financial crisis and called upon me, the college graduate, to help them out of it.
- Banking panics were at the genesis of a number of financial crises of the 19th, 20th, and 21st centuries, many of which led to recessions or depressions.
- Stock market crashes, credit crunches, the bursting of financial bubbles, sovereign defaults, and currency crises are all examples of financial crises.
Meaning of Financial crisis & Financial crisis Definition