Definition of Bank Run A situation that occurs when a large number of bank or other financial institutions customers withdraw their deposits simultaneously due to concerns about the banks solvency. As more people withdraw their funds, the probability of default increases, thereby prompting more people to withdraw their deposits. In extreme cases, the banks reserves may not be sufficient to cover the withdrawals. A bank run is typically the result of panic, rather than a true insolvency on the part of the bank; however, the bank does risk default as more and more individuals withdraw funds - what began as panic can turn into a true default situation. Also called a run.
Posted on: Sat, 12 Apr 2014 17:59:43 +0000
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