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حسابداری و مالی::
اثر دومینو
• Politicians and regulators want to avoid the systemic "domino effect", as banks are heavily interconnected among each other and the failure of an even small one could lead to the demised of many other and of even much larger ones (this is referred as the "Herstatt risk", after the demise of a local German bank that played just like that-as the first piece of a domino).
Liquidity risk would then translate into solvency risk, as greater and greater losses are experienced via these "forced sale"-therefore biting back the liq- uidity situation, but also in turn the profit and loss account, and therefore the regulatory capital and thus the solvency ratio of the bank, spreading the issues to other banks in a pandemic scenario leading to the feared "domino effect"
;This, given the strong interlinkages present in the global financial system, translates in the feared "domino effect" or "Herstatt risk" (named after the small German community bank that almost created a financial meltdown in the Country and in the international financial markets, because of the closely interconnected interbank money market).
The domino effect is then showing a tendency of becoming a "self-fulfilling prophecy", as it usually translates in market panic, given the usual over reactions of the media and the people.
On this basis, following the formal decla- ration of the "crisis state" of the bank and its significant risk of "gone concern", the regulators should consider if the failed or likely to fail bank has a specific public relevance and potential domino effects, or not.
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