What Is a Bank Run?

But what exactly is a bank run? Here’s what you need to know along with a few notable examples.

What is a bank run?

A bank run occurs when depositors (that is, customers) attempt to withdraw their money (deposits) from a bank because they fear the institution will fail. Generally, a bank run occurs en masse. People will attempt to get their cash out at the same time before the bank becomes insolvent (i.e., collapses). As more customers withdraw their deposits, a bank can use up all its reserves and end up defaulting.

Should I pull my money out of the bank? 

If you’re an individual depositor, the short answer is “probably not.” Insured banks and credit unions are secure places to keep and manage your money. It’s safer to deposit your funds into a bank account than it is to stash cash at home, where it could be subject to theft or be lost in a disaster. 

Deposits at a bank or credit union that is insured by the Federal Insurance Deposit Corp. or the National Credit Union…

Continue Reading →

This article was written by Ruth Sarreal and originally published on www.nerdwallet.com