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 ?
Bank Liquidity and Bank Runs Each bank has to be liquid, which means that it should have sufficient financial resources to meet its obligations as they fall due or be able to obtain such funds at reasonable costs.
But there would be a nationwide bank run if they reopened the banks without strict limits on cash withdrawals and transfers overseas.
Fear of a bank run has led the government, which is led by Nicos Anastasiades, to keep banks closed until at least Thursday.
1) The view on fundamental-based bank runs argues that bank runs occur when depositors receive negative information about their bank's portfolio returns or about an aggregate liquidity shock.
In the case of deposit insurance, many countries have raised deposit insurance coverage while some even have provided full coverage in order to curb bank runs.
During the Great Depression, the prospect of bank runs became reality.
Moreover, heavy withdrawals mean bank runs, and trigger bank closures, which throttle the availability of credit, especially to small businesses, and impair the economy's ability to channel financial resources towards their best use (Mankiw, 2008).
Without them, Saturday morning would have brought even more ruinous bank runs, with legions of depositors descending on their banks in desperation at the very moment the new president took the oath of office.
Government provision of deposit insurance is often rationalized on the grounds that it stabilizes the banking system by removing the incentives for depositors to engage in bank runs.
When the subsidiaries select "payment," the bank runs the netting cycle, which calculates how much each buyer owes the seller from a global point of view.
Many forecasters warned, despite all the evidence to the contrary, that bank runs would ensue in the spring of 2002, when the government lifted full guarantees on all time deposits at the banks.
According to the first theory, bank runs are exclusively driven by changes in economic fundamentals, such as a deterioration in the return on investment.