Why Banks Fail

Moxie Clifford

Econ Focus, 2025, vol. 25, issue 4Q, 29

Abstract: Why do banks fail? One popular view emphasizes the role of bank runs, when a bank's customers collectively withdraw their money on the belief that the bank will soon fail. Bank runs, according to this view, can cause otherwise healthy banks to fail — the panic itself creates a self-fulfilling prophecy. This is often cited as an important cause of bank failures during the Great Depression, the 2008 financial crisis, and the 2023 U.S. banking crisis. A recent paper, however, casts serious doubt on this narrative.

Keywords: Financial; Institutions; and; Regulation (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.richmondfed.org/-/media/RichmondFedOrg ... search_spotlight.pdf Journal Article (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedrrf:102224

Ordering information: This journal article can be ordered from

Access Statistics for this article

More articles in Econ Focus from Federal Reserve Bank of Richmond Contact information at EDIRC.
Bibliographic data for series maintained by Christian Pascasio ().