A central bank like the federal reserve in the united states can help banks survive a bank run by9/23/2023 ![]() This can destabilize the bank to the point where it runs out of cash and thus faces sudden bankruptcy. As a bank run progresses, it may become a self-fulfilling prophecy: as more people withdraw cash, the likelihood of default increases, triggering further withdrawals. ![]() ![]() When they transfer funds to another institution, it may be characterized as a capital flight. In other words, it is when, in a fractional-reserve banking system (where banks normally only keep a small proportion of their assets as cash), numerous customers withdraw cash from deposit accounts with a financial institution at the same time because they believe that the financial institution is, or might become, insolvent. American Union Bank, New York City, April 26, 1932Ī bank run or run on the bank occurs when many clients withdraw their money from a bank, because they believe the bank may fail in the near future.
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