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What Is a Run on the Bank?

Savvy ATM: Why a Run on the Bank Is So Bad


Bad banking news has many people fearing their life savings will suddenly vanish and has created a somewhat panic-ridden population. Questions are flying about pulling money from the bank in case it collapses, but that's the most counter-productive thing to do in this scenario. Keeping your money under your mattress is not the way to go!

According to Investopedia, a bank run is "a situation in which numerous bank customers try to withdraw their bank deposits simultaneously and the bank's reserves are not sufficient to cover the withdrawals." So, the fear that a bank will become insolvent and results in a bank run, is the exact reason a bank could become illiquid. When it comes to your money, panic-induced decisions are rarely good ones.

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