How are most financial institutions protected?

Most financial institutions are protected through a combination of regulatory frameworks, insurance mechanisms, and risk management practices. They are subject to regulations imposed by government bodies, which include capital requirements and stress tests to ensure stability. Additionally, institutions often have insurance policies, such as deposit insurance (e.g., FDIC in the U.S.), that safeguard customer deposits. Furthermore, they employ risk management strategies to identify and mitigate potential financial risks.