Bank runs

A bank run occurs when many depositors lose confidence in a bank’s stability and attempt to withdraw their funds simultaneously. Since banks typically don't keep enough cash on hand for all deposits—using most of it to make loans or investments—they can struggle to meet sudden withdrawal demands. This panic can cause the bank to actually become unstable or collapse, even if it was originally solvent. Bank runs often spread quickly, especially if people hear others are withdrawing funds, creating a self-fulfilling crisis. Governments and central banks intervene to prevent or stop bank runs and protect the financial system.