# Liquidity shock

- Canonical URL: https://www.gerhardmerk.de/liquidity-shock
- Post ID: 593409
- Modified: 2023-07-25T21:02:02+00:00
- Language: en

## Definition

The sudden, unexpected lack of liquidity for - an individual institution or - for the market as a whole, as occurred in the course of the subprime crisis and drove even large banks into insolvency. As a result, institutions can only refinance themselves at a very high cost - they have high purchase prices for money, as it were - and have to increase their interest rates on loans accordingly. - To avoid this in the future, banks should hold sufficient highly liquid assets to meet strong short-term liquidity needs. In addition, institutions need liquidity management geared to long time horizons, combined with risk management that prevents ways of refinancing susceptible to risks. Many national and international supervisory measures are designed to ensure that banks in particular remain liquid, i.e. solvent at all times, even under stress. - See bank rule, golden rule, Hypo Real Estate rescue, credit crunch, liquidity crunch, liquidity crisis plan, liquidity cushion, liquidity buffer, liquidity regulation, liquidity at risk, stress test, quantitative easing, corporate funding, loss-loan relationship. 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/

## Machine-readable

- Generator: Merk Knowledge 1.1.1