Is when a bank's balance sheet is in a position of a large liquidity mismatch. This can occur because of the liabilities maturing earlier than the assets and therefore bank's are left with no option but to sell their assets off at a firesale price prompting fears of a bank run and ultimately, if severe enough, can lead to bankruptcy.
Below is the logical sequence of reasoning for a liquidity crisis to summarise the main stages at which it occurs inside a bank's balance sheet.
