Bank run

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Bank run (bank panic)

A series of unexpected cash withdrawals caused by a sudden decline in depositor confidence or fear that the bank will be closed by the chartering agency, i.e. many depositors withdraw cash almost simultaneously. Since the cash reserve a bank keeps on hand is only a small fraction of its deposits, a large number of withdrawals in a short period of time can deplete available cash and force the bank to close and possibly go out of business.

Bank Run

An event in which many account holders at a bank withdraw all of their funds at the same time because they do not believe the bank is solvent. Ironically, the pressure of a bank run itself can cause the bank to become insolvent. In the United States, bank runs were fairly common before the creation of the FDIC, which insures bank deposits up to a certain amount. See also: Panic.
References in periodicals archive ?
At first glance, Bernanke appears to be arguing that the bank panics constituted an enormous shock to aggregate supply.
Gorton (1988) studies bank panics during the National Banking Era (1865-1914).
Finally, the availability of the discount window was also expected to reduce the risk of bank panics in two ways.
Another facet of ending bank panics entailed creating an "elastic currency.
This figure and the others that follow essentially document the unfolding of the bank panic.
When the stock market reopened on March 15, the Dow Jones Industrial Average jumped more than 15 percent, the biggest one-day percentage gain ever, and the bank panic had ended.
Indeed, for some time now, bank panics and liquidity crises have seemed a thing of the past, so much so that most economists, until very recently, have viewed them as a solved problem.
Franklin Roosevelt's warning, "the only thing we have to fear is fear itself," (21) was provoked by bank panics and the terrors of poverty and disorder during the Great Depression.
Lizardo Sosa, president of BANGUAT and director of the government's monetary board (Junta Monitaria), said the banks needed central bank credit lines to meet depositor demand and prevent a general bank panic.
As the panic begins * savings decline * deposits decline * loans decline * investment declines * production declines * jobs decline * income declines * further decline in consumption and savings * some banks start to have trouble * call in loans * confidence in the economy and banks begin to decrease * people pull money out of some banks, even good banks * further decline in savings * smaller banks pull their money out of larger banks * cash flow problems widen for businesses and banks * banks call in more loans or sell stocks * not all loans can be repaid immediately * stock prices decline for no one is buying * further decline in confidence * bank panic deepens and widens.
He promised me holidays in Bali and Mauritius, then cancelled because he was too busy, even after the bank panic was over.