"banks typically come under financial stress because of: a. the money multiplier effect. b. a widespread decline in the value of their assets. c. diversification of loan assets. d. risks associated with extraordinary economic gains."

Option B

Explanation: Banking companies comes under financial stress due to decline in value of their assets which might further result in bankruptcy.

   Financial distress refers to the situation when an entity starts having trouble in paying to their creditors. When the assets of banks such as those mortgages on which they have provided loans to their customers starts declining in value , then banks starts getting shortage of funds for paying to their creditors.

From the above we can conclude that right answer is option B.

The correct answer to the following question is option B) when there would be widespread decrease in the value of the assets, at that time banks will come under financial stress.

Explanation:

For a bank whether it be public or commercial , its assets would be loans and advances that banks gives or lend to the borrowers, who can be individuals or corporate or institution. When the value of such assets decreases and when banks assets becomes non performing ( which means a default has been made on the loan given by the bank ) , then the banks would come under huge financial stress.

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