LeoGlossary: Bank Run
Bank runs are possible due to the fractional reserve banking system we operate under. Here, deposits are loaned out on a long-term basis. This creates a situation where, if enough customers want their cash, the bank will not have enough reserves to cover the deposits.
The system operates on the premise that not everyone will want their money at the same time. For the most part, this is correct. However, there are point in history where runs did occur.
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