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    Question

    Systemic risk is the risk due to

    A Failure of a bank due to non-compliance with regulations Correct Answer Incorrect Answer
    B Contagion effect leading to failure of a group of banks Correct Answer Incorrect Answer
    C Bankruptcy of one bank leading to failure of few more banks Correct Answer Incorrect Answer
    D Failure of a bank due to slippages in internal systems of the bank Correct Answer Incorrect Answer
    E Failure of entire banking system Correct Answer Incorrect Answer

    Solution

    Systemic risk refers to the risk of a breakdown of an entire system rather than simply the failure of individual parts. In a financial context, it denotes the risk of a cascading failure in the financial sector, caused by linkages within the financial system, resulting in a severe economic downturn

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