---
entity_slug: bank_failure_mechanisms
entity_type: Process
vsm_system: S3
type_rationale: Bank failure mechanisms represent a sequence of activities and transformations
  over time, involving cycles of credit extension, liquidity management, and eventual
  insolvency rather than being a static entity.
vsm_rationale: These mechanisms operate within the management system's domain of resource
  allocation and operational control, specifically concerning how banks allocate capital
  and manage their lending operations before failure occurs.
classified_at: '2026-02-23T10:45:42.907799'
---

# Classification: Bank Failure Mechanisms

## Entity Type

Process

## VSM System

S3

## Type Rationale

Bank failure mechanisms represent a sequence of activities and transformations over time, involving cycles of credit extension, liquidity management, and eventual insolvency rather than being a static entity.

## VSM Rationale

These mechanisms operate within the management system's domain of resource allocation and operational control, specifically concerning how banks allocate capital and manage their lending operations before failure occurs.
