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 ?
Again, the same features that one finds in an old-fashioned bank panic can be seen at work here: a dramatic tipping-point effect that creates volatility, along with a vicious cycle of collectively selfdefeating behaviour.
Indeed, this insolvency function of the FDIC may be the most important government tool for limiting and preventing bank panic, because it can resolve the bank (that is, it can take over the bank's assets and sell them) slowly, according to its own schedule.
I compare the timing of branch bank failures to descriptions of bank panics by Friedman and Schwartz (1963) and Wicker (1996).
Partly, the methodology behind bank panics worried some teachers.
If the crises in East Asia were just bank panics, could they not have been avoided by appropriate provision of liquidity?
The "asymmetric information" theory sees the origins of bank panics not on the liability side but rather on the asset side.
Another facet of ending bank panics entailed creating an "elastic currency.
In other words, Friedman conceives of the bank panics as an enormous shock to aggregate demand.
in 1866, a giant interconnected bank denied a bailout on the grounds that it was poorly managed and deserved to fail, the English system suffered no bank panics for the remainder of the 19th century.
According to the World Bank, bank panics today are twice as prevalent than during the period before financial globalization.
In some ways, however, the monetary policy response to all three of these experiences was similar to the response to bank panics that the Federal Reserve System was created to handle.
They had the potential to be a major force behind monetary contraction before the bank panics started and the downturn gained momentum.