systemic financial crisis

A systemic financial crisis occurs when the entire financial system faces severe instability, causing widespread failures of banks, markets, and financial institutions. This can happen when losses, risky behaviors, or real economic issues trigger panic, leading to a loss of confidence and liquidity. As institutions fail or withdraw funds, it can spread rapidly, disrupting credit flow, business operations, and economic growth. In essence, it’s a situation where problems in one part of the financial system threaten the stability of the entire economy, often requiring government intervention to restore confidence and prevent a broader economic collapse.