Name: Nguyễn Hoàng Phương Linh - 10190547

Many reasons can lead to a bank run; in the article, Lord Turner has mentioned six
reasons that led to the failure of RBS. Each of these reasons caused some significant
damage to the bank. However, it always exists the most fundamental reason that mainly
causes the bank to fail. In my opinion, the most significant one is the over-dependence
attitude on unsafe momentary discount financing, which was allowed by an insufficient
way to deal with the guideline of liquidity.
In the first place, the wholesale market refers to two possible business models. A
business may buy goods in large quantities directly from manufacturers, warehouse them,
and resell them. Or wholesale may refer to companies that produce their products and sell
them directly to retailers, who then sell products to the end-user. Wholesale suppliers
often source some trending products to ensure that they can supply the most up-to-date
goods to retailers. When a trend is identified, those in wholesale will research and source
the most cost-efficient products, choosing from many manufacturers and distributors.
Wholesale operators then supply these products to retail businesses for purchase. The
interest rate risk of this market is very high. Expecting an individual or another (bank B)
that gets from bank A can't reimburse the obligation, bank A won't have the option to
take care of momentary advances from the discount market. When a bank can't
compensate for the burden, it brings about the absence of liquidity at another bank that
loans the responsibility, which prompts the breakdown of different banks' progression
and influences the whole financial framework, both homegrown and global. This marvel
is known as the domino impact.
On the other hand, wholesale markets can make a bank fail due to the lack of
liquidity as the management supervision was absented. The role of a management
supervisor is significant as they can manage both the risk and capital. If this part of the
bank lacks, that means the bank lacks information to calculate the risk of trading in the
wholesale market. Because of the lack of risk calculation, the bank only concentrates on
the immediate benefits. This problem can lead to the bank run or bank problems.
To conclude, it can be said that trading in the wholesale market with short-term
loans can bring some significant issues that may lead to a bank run. However, it cannot
be denied that the wholesale market can get such benefits to a bank. To avoid the risk, a
bank needs to have a management supervision department to calculate all the trouble
strictly.