How a bank run happens
Process map by Brian. 15 steps, 1 layer. Tags: finance, economy, news.
- The bank: Deposits flood in and are invested in long-term bonds
- The bank: Interest rates rise, so the bonds lose value
- News and social media: A rumor or a filing reveals the loss
- Depositors: Worried: withdraw?
- Depositors: Withdraw, and tell friends
- The bank: Withdrawals surge, and it must sell bonds at a loss
- The bank: Does it have enough cash and capital?
- The bank: It survives
- News and social media: Panic spreads online in hours
- Regulators: Regulators close the bank
- Deposit insurance: Insured deposits are protected; others wait
- Regulators: Does the problem spread to other banks?
- Regulators: Emergency lending and guarantees
- Depositors: Confidence slowly returns
- Depositors: Wait and see