Bank Runs and Interest Rates: A Revolving Lines Perspective

Falk Bräuning and Victoria Ivashina

No 26-4, Working Papers from Federal Reserve Bank of Boston

Abstract: Revolving credit is at the core of the banking business. Corporate revolving credit lines are demandable claims; therefore, as with a traditional bank run on deposits, sudden widespread drawdowns on credit lines can destabilize the banking sector. However, we show that, unlike with deposits, credit-line utilization is highly sensitive to interest rates. A run on revolving lines is less likely in a high-interest-rate environment, but when the Federal Reserve cuts the interest rate to support a weak banking sector, the sector can become vulnerable to such a run.

Keywords: bank liquidity; corporate credit; bank runs; financial crises (search for similar items in EconPapers)
JEL-codes: G01 G21 G32 (search for similar items in EconPapers)
Pages: 55
Date: 2026-02-01
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Working Paper: Bank Runs and Interest Rates: A Revolving Lines Perspective (2026)
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DOI: 10.29412/res.wp.2026.04

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