Professional Documents
Culture Documents
By
THE INVESTOPEDIA TEAM
Reviewed by
TOBY WALTERS
What Is a Liquidity Crisis?
A liquidity crisis is a financial situation characterized by a lack of cash or
easily-convertible-to-cash assets on hand across many businesses or
financial institutions simultaneously.
In a liquidity crisis, liquidity problems at individual institutions lead to an acute
increase in demand and decrease in supply of liquidity, and the resulting lack
of available liquidity can lead to widespread defaults and even bankruptcies.