Time subordination: Difference between revisions
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imported>Doug Williamson (Create the page. Source: ABI response to CESR consultation https://www.abi.org.uk/~/media/Files/Documents/Consultation%20papers/2012/09/ABI%20response%20to%20HMT%20consultation%20%20-%20Financial%20sector%20resolution%20FINAL.pdf) |
imported>Doug Williamson (Expand.) |
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From an individual depositor's perspective, it is rational to withdraw a deposit once the run has begun. | 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.) | |||
Revision as of 17:47, 12 November 2016
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.)
