Bank run

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A bank run is a series of unexpected large cash withdrawals from a bank caused by a sudden decline in depositor confidence or fear that the bank will be closed by the chartering agency, i.e. many depositors withdraw cash almost simultaneously. Since the cash reserve a bank keeps on hand is only a small fraction of its deposits, a large number of withdrawals in a short period of time can deplete available cash and force the bank to close and possibly go out of business. Bank runs are a risk for every bank that operates under a fractional-reserve banking system.[1]

References

  1. Mankiw, N.G. Principles of Macroeconomics; South-Western Cengage Learning; Mason, OH. Page 353, (2008)

Sources

http://usinfo.state.gov/products/pubs/oecon/chap12.htm

See also

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