Original Research

Bank runs: A risk mismanagement perspective: A note

H. Abraham
South African Journal of Business Management | Vol 39, No 4 | a572 | DOI: https://doi.org/10.4102/sajbm.v39i4.572 | © 2018 H. Abraham | This work is licensed under CC Attribution 4.0
Submitted: 10 October 2018 | Published: 31 December 2008

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H. Abraham, School of Economics, University of Cape Town, South Africa

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Abstract

This paper demonstrates that the fractional reserve system is a source of instability in commercial and investment banks. The purpose of investment banks is to enhance completeness of financial markets and thereby contribute to an efficient allocation of risk. When funds are raised through commercial banks to transact in securities of investment banks, this can cause instability to commercial and investment banks as is experienced currently in world financial markets.

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