A prolonged period of liquidity difficulties may easily leave no other choice to the institution than an emergency sale of assets at significant losses and a subsequent depletion of its capital position. Therefore a liquidity problem, if it cannot be properly addressed – possibly by the intervention of the central bank- can easily lead to insolvency.
Just keep a cool head! Proposal #2: From debt sustainability… to obtaining the investment grade for Greek public debt We have every confidence that our lenders will keep their word on providing Greece with further debt relief - pacta sunt servanda applies to both lenders and borrowers - and deliver on what they promised since November 2012.