When Banks Fail: What Happens During a Bank Run?

In this video, we will discuss the concept of bank runs and their potential to cause chaos in the financial system. A bank run occurs when many customers withdraw their deposits from a bank simultaneously, causing concerns about the institution's ability to pay its debts. This fear can create a negative feedback loop, causing even more people to withdraw their funds, which can lead to genuine insolvency. To prevent bank runs, financial institutions must maintain a minimum amount of cash reserves and have limits on how much they can store in their vaults each day. However, banks may need to sell assets at a lower price to increase their cash on hand, causing further concern among customers.

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Disclaimer: This video is for entertainment purposes and does not constitute personal financial advice on whether to buy or sell a specific financial security. Capital is at risk; investments may decrease in value as well as increase. You may not get back all the money invested. Investment objectives may differ, and therefore investment strategy must be factored in. If in doubt, seek advice from an investment adviser regulated by the Financial Conduct Authority (FCA).