scroll to top
Stuck on your essay?
Get ideas from this essay and see how your work stacks up
Word Count: 2,078
Economics 2 - Macroeconomics Essay What are the causes of bank runs At the centre of any banks operations is a relationship which at any given time could become a major problem but for the great majority of the time is not A bank relies on the fact that although any and all of its depositors have a right to withdraw that money at a given time it is very unlikely that a great number of them will Indeed it is expected that on average about as many people will choose to deposit some money with a bank on a given day as will want to withdraw some Of course as it is likely that these amounts will not match exactly a bank holds a percentage of its assets in cash or at least liquid reserves in order to make up the difference if this is necessary The remainder of a banks assets are split between short-term loans such as credit cards and overdraft facilities which are relatively liquid Liquidity being the relative ease with which an asset can be turned into cash Thus long-term loans perhaps to buy a house mortgage a car or to start up a business repaid over a much longer period of time are therefore much less liquid This imbalance creates the possibility of a crisis situation where if a certain number of depositors decided to withdraw their money at the same time the bank would be unable to pay A rush of withdrawals of this kind is known as a bank run From this point I will be examining the most likely and most observed causes of both the difficulties suffered by a bank initially ways in which this can become a run on this bank and later a run on many banks as a result Having done this I will later be looking at the primary methods of preventing such runs Firstly
@Kibin is a lifesaver for my essay right now!!
- Sandra Slivka, student @ UC Berkeley
Wow, this is the best essay help I've ever received!
- Camvu Pham, student @ U of M
If I'd known about @Kibin in college, I would have gotten much more sleep
- Jen Soust, alumni @ UCLA