Final answer:
Electronic money management risk: Liquidity risk due to inadequate cash reserves could lead to a bank run and failure.
Explanation:
Liquidity risk is the risk associated with electronic money management that can arise when a bank does not have enough cash on hand. This risk emerges when depositors try to withdraw their money faster than the bank can provide it, potentially leading to a bank run and failure.
During economic downturns, this liquidity risk is exacerbated as depositors may doubt the bank's ability to fulfill their demands, causing a rapid depletion of cash reserves.
Banks must carefully manage their liquidity to ensure they have enough cash to meet potential withdrawal demands and avoid insolvency.
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