BANK RUN
WHAT IS BANK RUN
A bank run is an event in which bank customers try to withdraw
more money from the bank than the bank can provide. Banks do not
keep all customer deposits available in cash for immediate withdrawal.
Instead, those assets are invested in loans and other types of
investments
What is a bank run in economics?
• A bank run occurs when a large number of customers of a bank or other
financial institution withdraw their deposits simultaneously over concerns of
the bank's solvency. As more people withdraw their funds, the probability
of default increases, prompting more people to withdraw their deposits
Who runs?
• Deposit Insurance:
Depositors over insurance coverage limit are more likely to withdraw
Below limit, higher account balance increases likelihood of withdrawal
• Relationships:
Higher the age of account lower the likelihood of withdrawal
Loan linkages: Increases likelihood of withdrawal
• Staff are more likely to run.
How do banks make money?
• It all ties back to the fundamental way banks make money: Banks use
depositors' money to make loans. The amount of interest the banks collect
on the loans is greater than the amount of interest they pay to customers
with savings accounts—and the difference is the banks' profit.
what happens when the bank runs out of
money
• A bank run happens when large groups of customers withdraw
their money from banks simultaneously based on fears that the institution
will become insolvent. With more people withdrawing money, banks will
use up their cash reserves and ultimately end up defaulting.
When was the last run on a bank?
• The last wave of bank runs continued through the winter of 1932 and into
1933.
How can I increase my bank balance?
• It's a habit. It doesn't matter how much you are able to save every month. ...
• Budget. Include savings as part of your spending plan. ...
• Make it automatic. Use your online banking resources to set up auto deposit
from checking into your savings account. ...
• Find extra money. ...
• Find good benefits.
Thank you
