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 IT ONLY TAKES A SMALL PERCENTAGE OF DEPOSITORS' FUNDS TO BE WITHDRAWN AT ONCE FOR A BANK TO BECOME INSOLVENT IN A FRACTIONAL RESERVE BANKING SYSTEM.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