Bank runs: A risk mismanagement perspetive: A note

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2008

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South African Journal of Business Management

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University of Cape Town

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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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