... capital requirement of 8%. Ggovernment also plays an important role with commercial banks as they have the power to let a bank failure or not, an example of this is Japanese banks who have had government bail them out (Resona a top five bank, received $17 billion1). There are also economic conditions that can cause bank failures. "A bank fails economically when the market value of its assets declines below the market value of its liabilities, so that the market value of its capital becomes negative. At such times, the bank cannot expect to pay all of its depositors in full and on time."2 Banks face credit risk, market risk, Interest rate risk, Liquidity risk and systematic risk, which will have an affect on banks. Systemic risk is thought to occur because all economic conditions are interconnected. This interconnection provides a chain along which shocks to any one agent are ...

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