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L.15 · BEGINNER · 2 MIN

How a Modern Bank Run Unfolds

Bank runs feel like a 20th-century phenomenon — black-and-white photographs of depositors queuing outside shuttered branches. The 2023 collapses of Silicon Valley Bank and Signature Bank were the modern version: same fundamental dynamic, transformed speed and venue. Understanding what changed matters for any investor holding bank stocks, bank bonds, or even uninsured deposits.

Quiz · 5 questions ↓

Why a bank run is a macro-contagion risk

A bank run is not just one firm's problem. When depositors flee one bank, funding markets can freeze and the fear jumps to peers that seemed unrelated — the contagion mechanism at the heart of every financial crisis. The 2023 failures showed the modern version: with mobile banking and social media, a run that once took days can now empty a quarter of a deposit base in hours. That speed is why bank fragility remains a live macro risk even after a century of regulation.

Where the full mechanics live

So far

The bank-level mechanics — FDIC insurance and uninsured deposits, held-to-maturity losses, liquidity coverage, and what to check on any bank you own — get their full treatment in Reading a Bank's Numbers › Is the Bank Safe? Capital and the Call Report.

Judging a bank against the 2023 failures

You hold shares of a regional bank whose latest 10-K shows 75 percent of deposits are insured, no single industry represents more than 15 percent of the deposit base, and unrealized HTM losses equal about 5 percent of tangible common equity. Compared to the 2023 failures, how is this bank positioned?
Check your understanding

Sit with the ideas.

In March 2023 a large US regional bank suffered roughly $42 billion of attempted deposit withdrawals in a single business day — about a quarter of its total deposit base in a few hours. A prior-era textbook describes bank runs as multi-day queues of depositors lining up at branches. How did the 2023 dynamic differ, and what does the difference imply for any bank an investor owns today?

Why:
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Other lessons in this course.

  1. 01Inflation: What It Is and Why It Matters
  2. 02The Fed and Interest Rates: How Policy Moves Markets
  3. 03The Yield Curve, in Plain English
  4. 04GDP: What the Economy Actually Produces
  5. 05The Business Cycle: Timing the Economic Seasons
  6. 06Fiscal Policy: Government Spending, Taxes, and Deficits
  7. 07The Fed’s Advanced Toolkit: QE, QT, and Forward Guidance
  8. 08Trade, Exchange Rates, and the Dollar
  9. 09Financial Crises: How Economies Break Down
  10. 10How the Federal Reserve Actually Works
  11. 11How Banks Create Money (and Why Reserves No Longer Bind)
  12. 12Reading a Bank Income Statement
  13. 13Bank Capital, Tier 1 Ratios, and Stress Tests
  14. 14Yield Curve Shape and Bank Net Interest Margin
  15. 15How a Modern Bank Run Unfolds— reading now
  16. 16National Income Identities: Why S = I (and Y = C + I + G + NX)
  17. 17Current Account = Capital Account: Why Trade Deficits Are Capital Inflows
  18. 18Fiscal Multiplier Mechanics: Why $1 of Spending Becomes $0.50-$2 of GDP
  19. 19Exchange Rate Regimes and the Impossible Trinity
  20. 20Capital Flows and Sudden Stops: Why EM Crises Look Alike
  21. 21The COT Report: Reading Speculative Positioning
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