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Bank Run

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Bank Run
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
    
A bank run (also known as a run on the bank) is a type of financial crisis. It is a panic which occurs when a large number of customers of a bank withdraw their deposits because they fear it is, or might become, insolvent. This action can destabilize the bank to the point where it becomes insolvent.
    
Banks retain only a fraction of their deposits as Cash (see fractional-reserve banking): the remainder is invested in securities and loans. No bank has enough reserves on hand to cope with more than the fraction of deposits being taken out at once. As a result, the bank faces Bankruptcy, and Will 'call in' the loans it has offered. This can cause the bank's debtors to face Bankruptcy themselves, if the loan is invested in a plant or other items that cannot easily be sold.
Posted by  marcus evans limited
 
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