Definition
A bank run signifies a rapid withdrawal of deposits. Understanding its dynamics is crucial for financial awareness. It is a situation where a large number of customers simultaneously withdraw their money from a bank due to concerns about its solvency.How It Works
Banks operate on fractional reserve, lending out most deposits. If too many depositors demand their cash at once, the bank cannot meet all obligations, creating a liquidity crisis.Causes
Causes include rumors of insolvency, fear of economic collapse, or a lack of trust in the bank’s stability.Consequences
A bank run can lead to the bank’s failure, loss of depositor confidence, and potentially broader financial system instability.Author
