Bank Runs

A bank run happens when a large number of depositors simultaneously try to withdraw their money from a bank because they fear it might fail or be unable to return their deposits.

Bank runs are typically triggered by rumors about a bank's financial health, negative news, or major economic crises. Since banks operate on a fractional reserve system (keeping only a fraction of deposits on hand), it's nearly impossible to handle a sudden massive withdrawal surge.

Bank runs can have devastating economic consequences — they can cause a bank to collapse and spread to other banks through a domino effect. Deposit insurance and central bank liquidity support are two primary tools for preventing bank runs.

Bangladesh has seen bank run-like situations at some weaker banks recently, where panicked depositors rushed to withdraw their funds, raising concerns about banking sector stability.