Bank Run
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A Bank Run is an economic event where a large number of depositors withdraw their bank deposits from a financial institution at the same time.
- Context:
- It can (typically) trigger a Banking Crisis.
- See: Fractional Reserve Banking, Self-Fulfilling Prophecy, Positive Feedback, Bankruptcy, Financial Crisis, Economic Recession.
References
2014
- (Wikipedia, 2014) ⇒ http://en.wikipedia.org/wiki/List_of_bank_runs Retrieved:2014-2-3.
- This is a list of bank runs. A bank run occurs when a large number of bank customers withdraw their deposits because they believe the bank might fail. As more people withdraw their deposits, the likelihood of default increases, and this encourages further withdrawals. This can destabilize the bank to the point where it faces bankruptcy.[1]
- ↑ Diamond DW (2007). "Banks and liquidity creation: a simple exposition of the Diamond-Dybvig model" (PDF). Fed Res Bank Richmond Econ Q 93 (2): 189–200. http://www.rich.frb.org/publications/research/economic_quarterly/2007/spring/pdf/diamond.pdf. Retrieved 2013-08-13.
- (Wikipedia, 2014) ⇒ http://en.wikipedia.org/wiki/bank_run Retrieved:2014-2-3.
- A bank run (also known as a run on the bank) occurs in a fractional reserve banking system when a large number of customers withdraw their deposits from a financial institution at the same time and either demand cash or transfer those funds into government bonds, precious metals or stones, or a safer institution because they believe that the financial institution is, or might become, insolvent. As a bank run progresses, it generates its own momentum, in a kind of self-fulfilling prophecy (or positive feedback loop) – as more people withdraw their deposits, the likelihood of default increases, thus triggering further withdrawals. This can destabilize the bank to the point where it runs out of cash and thus faces sudden bankruptcy.