Systemic risk

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The risk that the failure of one participant in a transfer system, or in financial markets generally, to meet its required obligations will cause other participants or financial institutions to be unable to meet their obligations (including settlement obligations in a transfer system) when due.

Such a failure may cause significant liquidity or credit problems and, as a result, might threaten the stability both of financial markets and of the wider economy.

These secondary adverse consequences are sometimes known as a 'domino effect' or 'contagion'.


See also