Bank runs can devastate a financial institution and cause it close its doors to customers because:

Question

Quizplus · Accepted Answer

Bank runs occur when many customers withdraw their deposits at the same time, causing the bank to run out of liquid funds to meet the demand. Not all deposits are easily converted into cash, such as time deposits, which have maturity periods and may require penalties to withdraw early. This makes it difficult for the bank to satisfy all customer withdrawals in a short period, leading to insolvency and closure.

Bank Runs Can Devastate a Financial Institution and Cause It