systemic risk
- The possibility that the collapse of a single financial organization like a bank might lead to the failure of other related institutions, damaging the broader economy
- The financial crisis of 2008 was a real-world example of systemic risk, with the failure of one bank leading to widespread economic struggles.
- Regulations aim to mitigate systemic risk in the financial sector to prevent a domino effect that could harm the economy.
- The collapse of a large, interconnected financial institution could create systemic risk.
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