Bank Run

Banking & Credit

A bank run occurs when many depositors simultaneously withdraw their funds, fearing the bank will fail. Banks operate on fractional reserves — they don't hold all deposits in cash, having lent most out — so simultaneous mass withdrawals can force any bank into insolvency. The 1929-1933 era saw thousands of US bank failures; FDIC insurance was created in response. Modern bank runs happen via electronic transfers, accelerating the crisis (Silicon Valley Bank's March 2023 failure saw $42 billion withdrawn in a day). FDIC insurance and the Fed's lender-of-last-resort function exist to prevent these spirals; check your bank's deposit insurance limits regularly.