What is a Run on a Bank?

A run on the bank occurs when a large number of people withdraw their deposits from a bank at the same time because they believe the bank will not be able to pay them back. This can happen for a variety of reasons, such as concerns about the bank’s financial stability, rumors about the bank’s insolvency, or a loss of confidence in the bank. When a large number of people try to withdraw their money at the same time, it can put a strain on the bank’s resources and, in extreme cases, can lead to the bank’s failure.

There have been many historical examples of runs on banks. One famous example is the run on the Bank of the United States in 1839. This run was caused by a combination of factors, including mismanagement and fraud by the bank’s directors, as well as economic downturns and political disputes. Another example is the run on Northern Rock, a British bank, in 2007. This run was triggered by concerns about the bank’s financial stability, which were exacerbated by a lack of communication and transparency from the bank’s management.

  1. The Panic of 1907: This financial crisis was triggered, in part, by a run on the Knickerbocker Trust Company, a New York-based bank. The run on the bank was caused by a series of financial scandals and mismanagement, and it quickly spread to other banks in the United States.
  2. The Great Depression: The Great Depression of the 1930s was marked by numerous bank failures, many of which were caused by runs on banks. The failure of banks during this time period led to a widespread loss of confidence in the banking system, and many people were hesitant to deposit their money in banks for fear of losing it.
  3. The Savings and Loan Crisis: In the 1980s, a series of bank failures in the United States, known as the Savings and Loan Crisis, were caused by a combination of risky lending practices and a run on the banks. Many people lost their life savings as a result of these failures.
  4. The Greek Debt Crisis: In 2015, there was a run on Greek banks as concerns about the country’s financial stability and its ability to pay its debts caused people to withdraw their deposits in large numbers. The run on the banks contributed to the broader economic crisis facing the country.

This page was last updated on January 2, 2023.

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