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
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.