Time subordination: Difference between revisions
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==See also== | ==See also== | ||
*[[Liquidity risk]] | |||
*[[Run]] | *[[Run]] | ||
*[[Stability]] | *[[Stability]] | ||
*[[Subordination]] | *[[Subordination]] | ||
[[Category:The_business_context]] | |||
[[Category:Identify_and_assess_risks]] | |||
[[Category:Manage_risks]] | |||
Latest revision as of 23:28, 17 March 2023
An effective ranking of claims or losses according to a time factor.
For example, the potential losses suffered by depositors during a bank run.
Those who withdraw their deposits first are the least likely to suffer losses.
This is one reason why bank runs can be self-perpetuating once they have started.
From an individual depositor's perspective, it is rational to withdraw a deposit once the run has begun.
(Even if the original reason for the run was not rational.)
