Bank run
A bank run happens when many depositors withdraw their money at once because they fear the bank will fail, which can make it fail even if it was sound.
Because banks lend out most deposits, no bank can pay everyone back at once. Deposit insurance, such as the FDIC's $250,000 cover in the US, exists to stop runs by removing the reason to rush.
Silicon Valley Bank's collapse in March 2023, after $42 billion was withdrawn in a single day, was a modern bank run.
Related terms
- Fractional reserve banking: Fractional reserve banking is the system in which banks keep only part of their deposits as cash reserves and lend out the rest, which creates new money in the economy.
- Bailout: A bailout is when a government or central bank gives money to a failing company or bank to keep it from collapsing, usually because its failure would hurt the wider economy.
- Moral hazard: Moral hazard is the tendency to take more risk when someone else bears the cost if things go wrong, such as a bank expecting a bailout or a driver who is fully insured.
Practise with $10,000 in play money
Free. No real money involved.
For learning only. This isn't financial advice.