Bank Run

A BANK RUN occurs when many people withdraw their money from a bank over a short period of time, usually because they fear the bank may become insolvent. This creates a cascading effect, increasing the risk of default and causing more withdrawals, leading to potential failure. It only takes a small percentage of depositors� funds to be withdrawn at once for a bank to become insolvent in a fractional reserve banking system. �A bank run is like a forest fire, it starts with a spark, but once it catches, it spreads quickly and is difficult to put out.� � Paul Krugman Nobel Prize-Winning Economist