# Solvency risk

- Canonical URL: https://www.gerhardmerk.de/solvency-risk-2
- Post ID: 589561
- Modified: 2023-07-25T21:13:52+00:00
- Language: en

## Definition

Risk of loss due to insolvency, especially - of the issuer of a financial instrument or - due to the insolvency of the counterparty. (Often there is a confusion as to liquidity risk and solvency risk. If a company has no cash, it will be liquidity risk; but if a company is not capable to pay debt, it will be solvency risk. - Solvency risk is more dangerous risk than liquidity because, if a firm has not cash, it can borrow for paying debt. But if the liabilities exceed the assets, nobody will give a loan and the company turns into insolvency). - See counterparty risk, crash, emerging markets, information sheets for financial instruments, intercreditor agreement, liquidity risk, London procedure, manifestation, risk, risk management, solvency. - Cf. BaFin Annual Report 2002, pp. 82 ff. and the respective BaFin Annual Report. Attention: The financial encyclopedia is protected by copyright and may only be used for private purposes without express consent! University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec. Professor Dr. Eckehard Krah, Dipl.rer.pol. E-mail address: info@ekrah.com https://de.wikipedia.org/wiki/Gerhard_Ernst_Merk https://www.jung-stilling-gesellschaft.de/merk/ https://www.gerhardmerk.de/

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