A bank run occurs when many depositors try to withdraw their funds at once because they fear the bank may fail. Because the bank holds illiquid assets, it may be unable to meet the withdrawals without selling assets at a loss.

A run can happen to a solvent but illiquid bank. The coordination problem is central: each depositor's incentive to withdraw depends on what they expect others to do.[1]

Deposit insurance, central-bank liquidity, and resolution regimes are designed to reduce run risk. Wholesale funding markets can also run, which is why regulators monitor funding stability.[2]

Sources

  1. Diamond, Douglas W.; Dybvig, Philip H.. Bank Runs, Deposit Insurance, and Liquidity. Journal of Political Economy. 1983. View source Accessed Nov 11, 2026.
  2. Board of Governors of the Federal Reserve System. Financial Stability Report. Federal Reserve. 2026. View source Accessed Nov 11, 2026.