Bank rush
A bank run or switch Storm (English run banks or run on the bank ) is a rush of customers in a bank , in which the investors as close as possible their deposits want (deposits) stand out. If several banks or even the entire banking sector are affected, one speaks of a bank storm or bank panic .
Typically, emerging doubts about the bank's viability are the trigger for the bank run. Since a bank holds only a fraction of its assets as cash and the majority is invested in longer-term assets , the bank run itself can easily end in bankruptcy . Banks create additional money in the form of book money by granting loans.
mechanism
The maturity transformation of banks only works if only a small number of savers make use of the option of withdrawing their deposits at short notice. Banks can handle normal withdrawal habits. If, however, rumors of problems or imminent imbalance become known, it is to be feared that savers from the respective bank will withdraw their deposits en masse. The risk that even guesswork can trigger a run of savers on their money is due to the fact that bank deposits are paid out one after the other, that is, according to the “first come, first served” principle. With the inability to pay out quickly, it is important for the individual investor that he withdraws his deposits faster than many other depositors who may then end up empty-handed.
There are several possible reasons for a bank or banks rush:
- Hyperinflation : If you are the first to withdraw your money, you can buy most goods for the same amount of money.
- Crisis of the bank : Since bank insolvency could threaten, the investor has to fear for his deposits and his risk increases the longer he leaves his deposits in the bank. The counter storm itself can then lead to the actual bankruptcy of the bank, like a self-fulfilling prophecy .
- Herd behavior : Investors observe a perhaps accidental mass withdrawal and blindly join it, trusting that there must be a specific reason.
In all of these cases, it is an optimal strategy for the investor to participate in the banking storm as early as possible, as this is the most likely way of getting his money. It is therefore a case of a Nash equilibrium . However, this situation is unstable , it can lead to the collapse of the bank and the loss of much of the deposits.
Examples
- 1907 banking panic in the USA
- Great Depression after the New York Stock Exchange Crash in October 1929
- Events around the Herstatt Bank in Cologne in 1974
- World economic crisis from 2007
- Argentina crisis
- In the summer of 2007 there was a run on the British bank Northern Rock . Due to a one-sided refinancing strategy, which mainly focused on the money market, Northern Rock ran into liquidity bottlenecks, as money market refinancing had become immensely expensive due to a shortage of liquidity and risk reassessment on the part of investors.
- In autumn 2008, the Swiss UBS withdrew CHF 25 billion in capital within a short period of time. As a result, the Swiss Confederation had to trigger an emergency plan that it had worked out together with UBS and the central bank to ensure the bank's liquidity .
- In the spring of 2012, significantly more cash was withdrawn from banks in Greece and Spain than usual and this was associated with the term bank run in many media. On June 12, 2014, the Greek central bank officially confirmed for the first time that a large amount of cash had been withdrawn two years earlier and that three military aircraft were used to fetch millions of 50 and 100 euro bills from abroad in order to get enough cash for the numerous withdrawals of Greeks to have.
- In June 2014, according to the Bulgarian government and central bank, criminals used false information via the Internet and SMS to induce numerous bank customers to withdraw their money; especially the customers of two banks. The central bank then took control of one of the two banks.
Demarcation
In Germany, billions of euros in cash are deposited and withdrawn at the Bundesbank every day, with differences between the amount of deposits and withdrawals that usually amount to billions of euros even in the monthly total. October 10, 2008 was a particularly high-paying day with 4.2 billion euros in cash, while only 1.5 billion euros in cash were deposited on that day. The month of October 2008 was the month with the greatest growth in the money supply so far, namely by 42 billion euros.
In December, the amount of cash in the euro area increases significantly each year and decreases significantly in January, for example, December 2007 20 billion euros increase, January 2008 12 billion euros decrease, December 2008 19 billion euros increase, January 2009 12 billion euros decrease, December 2010 € 18 billion increase, January 2011 € 13 billion decrease, December 2011 € 16 billion increase, January 2012 € 14 billion decrease.
activities
Deposit insurance
If a saver can rely on the repayment of his deposit, regardless of whether the other savers withdraw their deposits or not, there is no rational need to withdraw their own deposit early. This is why deposit guarantee systems can prevent a bank run, as they guarantee the bank's liquidity, especially in times of crisis. With this, the investor is given the security of not losing his deposits through the issue of securities or the option of transferring the investments to another bank. Deposit insurance can be organized by the state and privately. A private institution must have sufficient collateral, while the state refinances itself by levying taxes. In Germany, a deposit insurance on a voluntary basis takes place similar to an insurance company by year, banks a sum of money to the deposit insurance deposit.
With a stochastic proportion of investors with consumption wishes in a period (see below: stochastic alpha), the optimal allocation can also be achieved through an ex-post tax .
Suspension of repayment
In order to prevent a bank run, the bank can announce that it will suspend payments above a certain blocking threshold ( suspension of payments ). This blocking threshold is contractually defined and made public. So only those investors who actually need the money will want to withdraw their deposits; Otherwise, everyone else will have to worry about their payouts, as it remains unclear when the blocking threshold will be reached and investors must be aware that every further withdrawal is subject to an ever greater risk.
However, this only works optimally if the proportion of savers who want to withdraw early is roughly known. Otherwise the problem is setting the threshold. If this is set too low, investors will mistrust the bank and will not invest; If this is chosen too large, then the bank has to provide a disproportionately large amount of money with which it can make little or no profit.
Direct limitation
The problem of the bank run arises from the fact that the bank cannot make any appreciable profit by simply storing money. It therefore endeavors to utilize its assets profitably by investing in profitable investments or lending money and receiving loan interest in return. Long-term investments usually bring more returns than short-term investments. In the event of a bank run, the bank is now unable to convert the long-term investments back into cash in the time available, so that despite there being sufficient capital, there is a risk of insolvency.
Theoretical Analysis of the Bank Rush: The Diamond and Dybvig Model
Deposits in the form of cash belong to the customer and due to the attribution of a fixed value, neither loss nor profit can be achieved with an exchange. For the customer, the money is therefore a constantly available reserve with which he can cover his fluctuating demand for consumer goods. The bank, on the other hand, cannot trade with it, unlike stocks or precious metals. In their model, Diamond and Dybvig assume that expenditure fluctuates over time and that the saver behaves in a way that minimizes risk. Payouts to the investor take place one after the other.
The process is divided into two periods. There are two types of investors: the first investor is only interested in the benefits he can get with his assets over a period of time, the second type considers the total benefit over both periods. If the wealth rises consistently, the increase in utility continues to decrease for both investors. Both investors can decide for a period of time whether they want to invest. Suppose there is an investment opportunity where a small profit is made over both periods, but no change occurs with only one investment period. In this case the investment is of no interest to investor 1 (i.e. they do not invest or they reclaim their deposits after a period of time), for investor 2 the investment is worthwhile and therefore no investor of type 2 will withdraw their investment after a period of time. The situation is stable.
Diamond and Dybvig have now been able to show that the involvement of a middleman (the bank) who invests without interest in making a profit can create an unstable situation. For this purpose, the investor of type 1 only needs to be given one opportunity to still get a smaller profit in just one period of time by balancing the risk between the two types of investors.
See also
- Banking supervision
- Bank failure
- Black Friday
- Northern Rock
- IndyMac Bank
- Bank Theory # Diamond and Dybvig's model: Bank Run
- System relevance
literature
- Doris Neuberger: Bank lending: microeconomic theory and macroeconomic implications. 1994, ISBN 3-16-146210-6 , pp. 93 ff.
Web links
Individual evidence
- ↑ Manfred Jäger-Ambrozewicz: Financing the real economy and the question of shadow banks . In: Audit Committee Quarterly . tape IV , 2014, p. 22–23 ( Online [PDF; 5.3 MB ; accessed on February 17, 2019]).
- ↑ The next crisis? Canada is experiencing a subprime moment. In: Telebörse. May 7, 2017. Retrieved February 17, 2019 .
- ↑ Victor Gojdka: Are we threatened by a bank storm soon? In: Tagesanzeiger. January 30, 2018, accessed February 17, 2019 .
- ↑ Manuel Özcerkes: The fear of the bank storm . In: dw.com. March 22, 2013, accessed February 17, 2019 .
- ↑ Ulrik Wolff: Equity ownership and corporate governance: An efficiency analysis of institutional financing relationships . Gabler, Wiesbaden 2000 ( full text search in the Google book search).
- ^ Paul Gallagher, Alexander Hartmann: Crisis signals in corporate bonds: Experts warn of new banking panic. In: Civil Rights Movement Solidarity. April 30, 2017. Retrieved February 24, 2019 .
- ↑ Working method of banking supervision against the background of the financial market crisis. (PDF; 1.7 MB) (No longer available online.) Institute of the German Economy Cologne, February 17, 2009, archived from the original on June 12, 2016 ; accessed on February 17, 2019 . Here p. 5.
- ^ Boris Kálnoky: Greek bank run - Athens' financial collapse, a spiral of horror. In: Welt Online . May 16, 2012, accessed May 18, 2012 .
- ↑ Fear of the crash: Spaniards plunder their bank accounts. In: Deutsche Mittelstands Nachrichten . May 17, 2012, Retrieved May 18, 2012 .
- ↑ FAZ.net June 12, 2014: Planes with money packages prevented a bank run in Athens
- ↑ FAZ.net June 30, 2014: EU approves billions for Bulgaria's banks
- ↑ a b c Deutsche Bundesbank: Monthly Report June 2009. (PDF) (No longer available online.) June 19, 2009, archived from the original on July 11, 2009 ; Retrieved May 18, 2012 . Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice.
- ↑ German Bundesbank: Time series TVE300. (No longer available online.) Formerly in the original ; Retrieved May 18, 2012 . ( Page no longer available , search in web archives ) Info: The link was automatically marked as defective. Please check the link according to the instructions and then remove this notice.
- ↑ Deutsche Bundesbank: Monthly Report April 2012. (PDF; 1.0 MB) (No longer available online.) April 20, 2012, archived from the original on May 22, 2012 ; accessed on February 17, 2019 .
