Learn what a bank run is, why even a solvent bank can face trouble, and how liquidity, confidence, and policy tools interact during a run.
A bank run occurs when many depositors try to withdraw funds from a bank at the same time because they fear the bank may fail or become unable to pay them.
The core issue is confidence.
Banks usually do not keep all deposits in cash. Under fractional reserve banking, they hold some reserves and invest or lend the rest.
That structure can work smoothly in normal conditions.
It becomes dangerous when too many depositors demand immediate repayment at once.
One of the most important ideas in understanding a bank run is the difference between:
A bank can have long-term assets that may still be worth money, but if it cannot turn them into cash quickly enough, it can still face severe run pressure.
Bank runs often feed on themselves:
This is why a bank run is partly a financial problem and partly a coordination problem. Each depositor may believe rushing early is safer than waiting.
Historically, bank runs involved lines outside branches.
Today, digital banking can make runs much faster because withdrawals can happen electronically and almost instantly. The basic logic is the same, but the speed can be much greater.
Common defenses include:
Measures such as Basel III and stronger bank capital frameworks are part of the broader effort to reduce run vulnerability.