What exactly is a bank ran? Here are some examples of bank runs.
What’s a bank run?
Bank runs are when customers, or depositors, attempt to withdraw money from a bank. They fear that the bank will fail. Generally, a bank run occurs en masse. Bank runs are a mass of people trying to get their money out before the bank goes under. A bank that has too many customers can exhaust its reserves and defaults on its loans will eventually lose all of its money.
Do I need to withdraw my money from the bank?
If you are an individual depositor, it is likely that you will not be allowed to deposit. Credit unions and insured banks are safe places to store and manage your money. It is safer to put your money in a bank account rather than stashing cash at home where it might be stolen or lost.
Deposits made at a bank/credit union that are insured by the Federal Insurance Deposit Corp./National Credit Union Administration are protected up to the maximum limits. This includes cash in checking and savings, money market accounts, and certificates of deposit.
A bank that is a member the FDIC has a standard limit of $250,000 per depositor. This also applies to each ownership category. Same applies to credit unions that are members of the NCUA. You should limit your assets to one financial institution so that you have funds in case the bank fails. Bank failures are very rare, however.
What was March 2023 like?
In March 2023, a bank ran experienced a high profile crisis. Greg Becker, CEO of Silicon Valley Bank, announced that the bank had lost nearly $2 billion. Investors and depositors attempted to withdraw $42 Billion from the bank the next day. The bank was left with a negative balance amounting to $958 million. California regulators closed the bank the next day.
Customers withdrew approximately 20% of Signature Bank’s deposit funds. New York regulators shut down the bank a few days later. Since October 2020, Signature Bank and Silicon Valley Bank were the first to go bust.
What was the 1930 bank run?
Bank runs are not a new phenomenon. The collapse of Caldwell and Company in November 1930 caused the Bank of Tennessee to close. It was the largest financial holding firm in the South at the time. A few days later, other Caldwell affiliated institutions were closed. This led to many more banks closing and failing. Depositors participated in bank runs in those areas where banks were closing. This led to panic and drove others to follow the lead. In a matter of weeks, hundreds of banks were also forced to close.
In December 1930, New York City’s fourth-largest bank closed. Bank of United States had planned to merge with another institution but that was canceled by depositors. The bank was shut down by the state’s banking chief. The news of the event caused panic, and more depositors ran to other banks. These bank runs and closings marked the beginning of the Great Depression.