Banks' cash stash: No shield against bankruptcy
According to theoretical physicists João da Cruz and Pedro Lind from Lisbon University, Portugal, imposing minimum capital levels for banks may not prevent the insolvency of a minority of banks from triggering a widespread banking system collapse. In a study recently published in EPJ B1, the researchers explain why this measure could instead lead to larger crises.
The authors created a model of banks' behaviour to assess the conditions needed to avoid "avalanches" of insolvent banks. Their model is based on a physical system of particles representing how banks are attracted ...





