Economics: How can you save Bank Failure??

Question

I'm pretty sure you use Monetary Policy, but im not sure WHAT it does to the banks. someone pls help?

Answer 1

I'd rather get rid of bank failure than save it.  

Answer 2

1.It is the responsibility of any country's central bank to maintain strict banking policies and regulations to make sure the banks dont collapse with the deposits it it is holding. This is done by the central bank requiring the banks to maintain a specific amount of money with it(central bank). This is to make sure that the bank is capable and is having enough capital base to finance its operations.

2.There is the cash liquidity ratio which the central bank requires the banks to maintain e.g. the central bank can require banks to maintain 50% of its capital in liquid cash form' this can enable the bank to finance any short term obligation e.g. cash demand request.

3.Failure of a bank is a very complicated issue and saving  a bank failure is a tedious task. it is an everyday task to be precise. take the case of a bank failing to honour checks drawn on it by its clients, this is an example of failure, and you can imagine if this information reaches a number of clients and the press! everybody will be camping at the banks door to withdraw their money and hence the failure. that is just one exampe there are alot more, so to prevent bank failure the management has maintain strict credit policy and a stable cash liquidity position.

4. Monetary policy is the process by which the government, central bank, or monetary authority of a country controls (i) the supply of money, (ii) availability of money, and (iii) cost of money or rate of interest, in order to attain a set of objectives oriented towards the growth and stability of the economy