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Sagot :
Insolvency. The bank is unable to repay depositors.
Explain the term "insolvency."
Insolvency occurs when a company or bank is unable to pay its debts with the funds available to it. In other words, banks or businesses become insolvent when their assets are insufficient to cover their commitments. It's crucial to understand that insolvency does not always entail bankruptcy. It can result in insolvency procedures, in which legal action is conducted against the insolvent individual or company and assets are liquidated to repay outstanding debts. In the example above, the bank's liabilities exceed its assets. This is why the bank is insolvent, as its assets are insufficient to cover its liabilities. In other words, they are unable to repay their depositors.
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