This gives rise to Gresham’s law, namely that “bad money drives out good money”, particularly during periods of banking crises. Therefore, the impact on the balance sheets of the commercial banks would be the same as in a classical bank run. Banks would increasingly lose the ability to attract deposits, creating a potential for more destructive financial crises.
However, as none of the three approaches would be able to entirely rule out the possibility bank failures, they would have to be reinforced by other measures. That is, a second line of defence would have to be drawn. 4.