Bank failures can occur due to inadequate risk management practices, poor lending decisions, economic downturns, and external shocks such as natural disasters or pandemics.

When banks fail, they're often unable to meet their financial obligations, including repaying deposits and other debts, which can trigger a domino effect in the financial system.

The failure of one bank can lead to a loss of confidence in the banking system as a whole, which can cause a widespread run on other banks, further exacerbating the crisis.

Therefore, regulators and policymakers need to ensure that banks maintain adequate capital buffers, implement sound risk management practices, and adhere to prudent lending standards to prevent bank failures and safeguard the stability of the financial system.