I understand why banks cannot pay people back in the moment, but wouldn’t they still owe their depositors their money when they eventually DO get the money back presumably once the recession is over?
This is all assuming the bank does not permanently go bankrupt of course. I understand that some banks may just never recover and close their doors for good.
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What the hell are ya doing with my money at your house, Fred?
What the hell are ya doing with my money at your house, Fred?
>This is all assuming the bank does not permanently go bankrupt of course.
That’s the problem. The bank owes lenders/ depositors money that it doesn’t have. If they declare bankruptcy, then whatever loans they’re unable to pay – including those of depositors – are effectively written off.
Whether the funds are secured/ insured are then dependent on the regulatory rules. And even that would likely cover a limited amount of money (per customer).
>This is all assuming the bank does not permanently go bankrupt of course.
That’s the problem. The bank owes lenders/ depositors money that it doesn’t have. If they declare bankruptcy, then whatever loans they’re unable to pay – including those of depositors – are effectively written off.
Whether the funds are secured/ insured are then dependent on the regulatory rules. And even that would likely cover a limited amount of money (per customer).
A bank run isn’t really caused because everyone needs their money right now it’s we don’t think the bank will survive and if it dies before we get our money out we will never get it back we have things today to make sure people don’t lose that money and importantly stop bank runs.
A bank run isn’t really caused because everyone needs their money right now it’s we don’t think the bank will survive and if it dies before we get our money out we will never get it back we have things today to make sure people don’t lose that money and importantly stop bank runs.
In the UK, bank deposits are protected by (IIRC) the Financial Services Compensation Scheme up to £85,000. This is actually pretty good protection against a bank run as there are not very many people with that sort of money sitting in a bank.
In the UK, bank deposits are protected by (IIRC) the Financial Services Compensation Scheme up to £85,000. This is actually pretty good protection against a bank run as there are not very many people with that sort of money sitting in a bank.
Most of the other comments answer this pretty well, but to summarize– usually a run on the banks is very bad for that bank and will lead to their insolvency, meaning without the FDIC (As it was during the great depression), people would be unlikely to get their money back. FDIC was formed in the 1930s to insure the first $250,000 in your account in the case where your bank goes insolvent. So pre-1930s, you would likely not be getting your money back if there was a run on the bank. Post-1930s, you get paid out by the federal government but may still experience some losses if you have millions of dollars sitting in a savings or checking account.
Most of the other comments answer this pretty well, but to summarize– usually a run on the banks is very bad for that bank and will lead to their insolvency, meaning without the FDIC (As it was during the great depression), people would be unlikely to get their money back. FDIC was formed in the 1930s to insure the first $250,000 in your account in the case where your bank goes insolvent. So pre-1930s, you would likely not be getting your money back if there was a run on the bank. Post-1930s, you get paid out by the federal government but may still experience some losses if you have millions of dollars sitting in a savings or checking account.
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