Financial Crisis

Financial Crisis
The term financial crisis is applied broadly to a variety of situations in which some financial institutions or assets suddenly lose a large part of their value.
Types of financial crises
Banking crises
Speculative bubbles and crashes
International financial crises
Wider economic crises
There brief detail is as follows
Banking Crisis
When a commercial bank suffers a sudden rush of withdrawals by depositors, this is called a bank run. Since banks lend out most of the cash they receive in deposits it is difficult for them to quickly pay back all deposits if these are suddenly demanded, so a run may leave the bank in bankruptcy causing many depositors to lose their savings unless they are covered by deposit insurance. A situation in which bank runs are widespread is called a banking panic
Speculative bubbles and crashes
Economists say that a financial asset e.g. stock exhibits a bubble when its price exceeds the value of the future income i.e. dividends or interest that would be received by owning it to maturity If most market participants buy the asset primarily in hopes of selling it later at a higher price, instead of buying it for the income it will generate, this could be evidence that a bubble is present. If there is a bubble, there is also a risk of a crash in asset prices: market participants will go on buying only as long as they expect others to buy, and when many decide to sell the price will fall. However, it is difficult to tell in practice whether an asset's price actually equals its fundamental value, so it is hard to detect bubbles reliably. Some economists insist that bubbles never or almost never occur.