Commercial banks are an important part of the financial system, especially for individuals’ borrowing and for the financing of small and medium-sized businesses. But there is an inherent fragility in banking because some bank assets are illiquid while the key bank liability, demand deposits, can be withdrawn at any time. Rules and regulations that attempt to address this fragility include capital ratio requirements, government oversight, and deposit insurance. Nonetheless, banks can fail, as shown by recent events. These failures highlight the importance of banks’ risk management, the role of oversight and ... (full story)