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 ?
So, what happened during bank panics? During the nineteenth and early twentieth centuries, the banks themselves developed increasingly sophisticated ways to respond to panics.
The debate over the gold standard and the free coinage of silver, bank panics, and the establishment of the Federal Reserve are basic to much of economic and political history.
While a run on the deposits of a single, solvent bank may be satisfied by disposing of its assets to other banks, this is not true if there is a generalised bank panic affecting the banking system as a whole.
bank panic was the unstable financial system that allowed questionable financial practices by unscrupulous businessmen.
Another facet of ending bank panics entailed creating an "elastic currency." Under the National Banking Act passed during the Civil War, the national banks chartered by the comptroller of the currency could only issue bank notes, which circulated as currency, if backed by government bonds.
In other words, Friedman conceives of the bank panics as an enormous shock to aggregate demand.
The failure in November of the privately owned Banco del Cafe (BANCAFE) set off a bank panic and demands in the National Assembly for legal action against bank officers and major stockholders held responsible.
There will be more arrests, connected to the bank panic of last week, said Interior Minister Tsvetlin Yovchev in Parliament.According to him the new arrests will most likely be this week.Yovchev added that the situation was already calming and urged the people to put their savings back in the banks which are absolutely stable.
The 1907 bank panic is interesting because the precipitating event was the decision by the National Bank of Commerce on October 21, 1907, to stop clearing checks for the Knickerbocker Trust Company.
(2.) Calomiris and Mason (1997) find evidence of depositors' confusion during the June 1932 bank panic, but they also find that solvent banks were able to support each other to avoid failure.
(4) Calomiris (1990, 1992c) argues that a nationwide branch banking system would not have experienced aggregate insolvency risk even during the worst episodes of bank failure and bank panic. (5) See the related discussion of other countries' experiences in Bordo (1990) and Calomiris (1992a).
Panics and bailouts of the 19th century / The authors open the book with a deep dive into the National Bank panics of the Gilded Age.