List of bank runs

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This is a list of bank runs. A bank run occurs when a large number of bank customers withdraw their deposits because they believe the bank might fail. As more people withdraw their deposits, the likelihood of default increases, and this encourages further withdrawals. This can destabilize the bank to the point where it faces bankruptcy.[1]

1800s[edit]

  • In 1866, Overend, Gurney and Company suffered a bank run. It incorporated as a limited liability company in 1865, but with poor railway stock prices, it suffered losses. Assistance from the Bank of England was refused, and payments were suspended on 10 May 1866. A panic ensued.

1920s[edit]

1990s[edit]

  • In early 1994 thousands of clients rushed to Spanish bank Banesto to withdraw their money.[2] Banesto was taken into control by the Bank of Spain when they discovered a 450,000 million Pesetas (€2,704 million) equity hole in bank's finances.
  • In 1999, a bank run happened in Malaysia where Bank Negara Malaysia (the Malaysian central bank) had to take control of MBf Finance Berhad, the biggest finance company in Malaysia during that time. Many of the finance company's 120 branches saw runs on their deposits, totalling about 17 billion Ringgit (US$4.49 billion).[3]

2000s[edit]

  • On 13 September 2007, the British bank Northern Rock arranged an emergency loan facility from the Bank of England, which it claimed was the result of short-term liquidity problems. The resulting bank run was not the traditional form, where depositors withdraw money in a snowball effect, leading to a liquidity crisis; instead, it occurred after news reports of a liquidity crisis that was not a bank run.[6] The resulting financial crises ended with the nationalisation of Northern Rock.[7]
  • On Tuesday, 11 March 2008, a bank run began on the securities and banking firm Bear Stearns. While Bear Stearns was not an ordinary deposit-taking bank, it had financed huge long-term investments by selling short-maturity bonds (Asset Backed Commercial Paper), making it vulnerable to panic on the part of its bondholders. Credit officers of rival firms began to say that Bear Stearns would not be able to make good on its obligations. Within two days, Bear Stearns's capital base of $17 billion had dwindled to $2 billion in cash, and Bear Stearns told government officials that it saw little option other than to file for bankruptcy the next day. By 07:00 Friday, the Federal Reserve decided to lend Bear Stearns money, the first time since the Great Depression that it had lent to a nonbank. Stocks sank, and that day JPMorgan Chase began an effort to buy Bear Stearns as part of a government-sponsored bailout. The deal was arranged by Sunday in an effort to calm markets before overseas markets opened.[8]
  • On 11 July 2008, U.S. mortgage lender IndyMac Bank was seized by federal regulators. The bank relied heavily on higher cost, less stable, brokered deposits, as well as secured borrowings, to fund its operations and focused on stated income and other aggressively underwritten loans in areas with rapidly escalating home prices, particularly in California and Florida.[9] A highly stressed institution,[10] IndyMac's capital was being lost to downgrades as the poor quality of their book was revealed.[11] Regulators at the Office of Thrift Supervision (OTS) had allowed the bank to misstate its financial condition, avoiding regulatory intervention.[12][13] On June 26, Sen. Charles E. Schumer released to the media letters he sent to the regulators, which warned the bank might not be viable. In the days following the release, depositors pulled out approximately 7.5% of the bank's deposits.[14][15] IndyMac and the OTS regulators who had allowed the bank backdate its books blamed Schumer's letters for the bank's demise. These regulators resigned or were fired amidst a Treasury Department investigation.[13][16][17] IndyMac's failure is expected to cost the FDIC more about $9 billion.[9] Uninsured depositors have lost an estimated $270 million.[18]
  • On 25 September 2008, the Office of Thrift Supervision was forced to shut down Washington Mutual, the largest savings and loan in the United States and the sixth-largest overall financial institution, on a Thursday due to a massive run. Over the previous 10 days, customers had withdrawn $16.7 billion in deposits. This is currently the biggest bank failure in American financial history. Normally, banks are seized on Fridays to allow the FDIC the weekend to prepare the failed bank for takeover by another bank. However, WaMu's size led regulators to shut it down on a Thursday.[19][20][21]
  • On 26 September 2008, Wachovia, the fourth-largest bank in the United States, lost $5 billion in deposits—about one percent of its total deposits—when several large customers (mostly businesses and institutional investors) drew down their accounts below the $100,000 limit for FDIC deposit insurance. This practice is known in banking circles as a "silent run." The Office of the Comptroller of the Currency and the FDIC were both concerned that Wachovia wouldn't have enough short-term funding to open for business on 29 September—which would have resulted in a failure dwarfing that of WaMu just a day earlier. They pressured Wachovia to put itself up for sale over the weekend.[22] Initially, Wachovia was to sell its commercial banking operations to Citigroup, but eventually the entire company was sold to Wells Fargo.
  • On 6 October 2008, Landsbanki, Iceland's second largest bank, was put into government receivership. The Icelandic government used emergency powers to dismiss the board of directors of Landsbanki and took control of the failed institution. Prime Minister Geir Haarde also rushed measures through parliament to give the country's largest bank, Kaupthing, a £400m loan. In addition, Iceland pleaded with Russia to extend 3bn in credit as western countries refused to help.[23] With over 5bn in savings held by Britons in Landsbanki, the Icelandic collapse threatens private citizens in the United Kingdom as well as companies in Iceland.[24]
  • October 2009 bank run on DSB Bank in the Netherlands after bank run caused by Pieter Lakeman.[25]

2010s[edit]

  • On 11 December 2011, a rumor was spread via Twitter that the Swedish banks Swedbank and SEB was having "problems" and there was a lesser hysteria in Latvia. People emptied their accounts, and according to local media there were long lines of people at the cash machines.[26] On December 12 the authorities started an investigation to locate the cause of the rumors, and the spokesman for Swedbank said that the situation seemed to be calming down.[27]
  • Jiangsu Sheyang Rural Commercial Bank in Yancheng, China suffered a three-day bank run on 24 March 2014, after rumors of the bank turning down a cash withdrawal transaction emerged.[28] Some branches remained open for 24 hours for the duration of the bank run, and tellers stacked cash behind teller windows to calm and reassure depositors.[29]

See also[edit]

References[edit]

  1. ^ Diamond DW (2007). "Banks and liquidity creation: a simple exposition of the Diamond-Dybvig model" (PDF). Fed Res Bank Richmond Econ Q 93 (2): 189–200. Retrieved 2013-08-13. 
  2. ^ The Independent (4 January 1994). "Banesto customers in rush to withdraw deposits". Retrieved 2013-08-13. 
  3. ^ Thomas Fuller (5 January 1999). "Preemptive Action Puts Central Bank in Control : Malaysia Takes Over MBf Finance". International Herald Tribune. Archived from the original on 2005-10-27. Retrieved 2013-08-13. 
  4. ^ McCandless G, Gabrielli MF, Rouillet MJ (2003). "Determining the causes of bank runs in Argentina during the crisis of 2001" (PDF). Revista de Análisis Económico 18 (1): 87–102. Retrieved 2013-08-13. 
  5. ^ "A Rush to Pull Out Cash". Los Angeles Times. 17 August 2007. Retrieved 2013-08-13. 
  6. ^ Shin HS (2009). "Reflections on Northern Rock: the bank run that heralded the global financial crisis". J Econ Perspect 23 (1): 101–19. doi:10.1257/jep.23.1.101. Retrieved 2013-08-13. 
  7. ^ "Northern Rock to be nationalised". BBC News. 2008-02-17. Retrieved 2008-04-08. 
  8. ^ Sidel R, Ip G, Phillips MM, Kelley K (2008-03-18). "The Week That Shook Wall Street: Inside the Demise of Bear Stearns". Wall Street Journal. Retrieved 2013-08-13. 
  9. ^ a b "FDIC Board Approves Letter of Intent to Sell IndyMac Federal". Retrieved 2013-08-13. 
  10. ^ "Office of Thrift Supervision Fact Sheet on IndyMac". Retrieved 2013-08-13. 
  11. ^ "IndyMac 10-Q, Capital Ratios section". Retrieved 2013-08-13. 
  12. ^ Andrews, Edmund L. (23 December 2008). "Irregularity Uncovered At IndyMac". The New York Times. p. 1. Retrieved 2013-08-13. 
  13. ^ a b "Treasury’s Watchdog Reviewing Backdating of Capital at Thrifts". Retrieved 2013-08-13. 
  14. ^ "Struggling Indymac Says Depositors Pulling Cash". Reuters. 2008-07-08. Retrieved 2008-07-08. [dead link]
  15. ^ Story, Louise (2008-07-12). "Regulators seize mortgage lender". New York Times. Retrieved 2008-07-12. 
  16. ^ "U.S. banking official Darrel Dochow retiring after furor over IndyMac failure". Retrieved 2013-08-13. 
  17. ^ "Secondary Market/Investors OTS Chairman Steps Down". Retrieved 2013-08-13. 
  18. ^ "Lax IndyMac regulation worsened exposure of depositors". Retrieved 2013-08-13. 
  19. ^ Reckard ES, Hsu T (2008-09-26). "U.S. engineers sale of WaMu to JPMorgan". Los Angeles Times. Retrieved 2008-09-26. 
  20. ^ Dash, Eric; Sorkin, Andrew Ross (2008-09-25). "Government seizes WaMu and sells some assets". New York Times. Retrieved 2008-09-26. 
  21. ^ "OTS press release on WaMu seizure". Archived from the original on 2008-09-29. Retrieved 2013-08-13. 
  22. ^ Rothacker, Rick (October 11, 2008). "$5 billion withdrawn in one day in silent run". The Charlotte Observer. Retrieved 2013-08-13. 
  23. ^ Mason R (2008-10-07). "Financial crisis: Iceland nationalises bank and seeks Russian loan". Telegraph.co.uk (London). Retrieved 2008-10-08. 
  24. ^ Wintour P, Treanor J, Seager A (2008-10-08). "£50bn bid to save UK banks". The Guardian (London). Retrieved 2008-12-15. 
  25. ^ "DSB clients to sue Lakeman over run". DutchNews.nl. Retrieved 2013-08-13. 
  26. ^ "Letter tömmer konton i svenska banker" (in Swedish). Retrieved 2013-08-13. 
  27. ^ "Lugnare i Lettland" (in Swedish). Retrieved 2013-08-13. 
  28. ^ Ruwitch, John (26 March 2014). "How rumor sparked panic and three-day bank run in Chinese city". Reuters. Retrieved 27 March 2014. 
  29. ^ "Chinese banks stack money in windows to quell rumours they have run out". Guardian. 26 March 2014. Retrieved 27 March 2014.