In the Diamond-Dybvig model, bank runs occur because the bank made poor investment choices or took on excessive risk.

The SRISK metric (expected capital shortfall during a systemic crisis) is useful for monitoring systemic risk at publicly traded banks but cannot capture risks at private institutions, which represents a significant blind spot.

Based on Panel A of Exhibit 2, Pinnacle Growth Bank’s unrealized securities losses reached approximately 95% of its equity by Q3Y2. What does this ratio mean in practical terms?

A bank names its lending technologies by their primary source of information. Match the correct primary information source to each technology:(i) Fixed-asset lending uses ___; (ii) Relationship lending uses ___; (iii) Small business credit scoring uses ___

In 2018, Congress raised the SIFI threshold from $50 billion to $250 billion. Based on the scenario in Exhibits 2 and 3, Pinnacle Growth Bank ($180 billion in assets) falls between these two thresholds. Why is this regulatory gap significant?

Using Exhibit 4, estimate which bank would have the lowest LC/TA ratio. Identify the two largest factors driving this result. (two answers)

Based on Exhibit 4, community banks like Harborview Savings contribute more to total US liquidity creation than money center banks because they hold a higher percentage of loans relative to total assets.

Which of the following are components of a lending technology as defined in the course material? (select all that apply)

Empirical research on a real-world bank run found that depositors living closer to bank branches withdrew earlier, confirming the Diamond-Dybvig prediction about the sequential service constraint. The same research found that depositors with longer banking relationships were significantly less likely to run. This second finding:

Harborview Savings Bank’s time deposits (CDs) represent 26.0% of total assets—nearly triple Summit Trust’s 9.0%. What does this difference reveal about their respective funding strategies?