What Do Over 3,000 Bank Runs Teach Us About Banking Crises?

Sergio Correia, Stephan Luck and Emil Verner

No 20260707b, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: Runs on financial institutions are one of the salient markers of financial crises. But the role of runs in crises is a topic of longstanding debate. Runs can be seen as the key turning point, whereby even small shocks can generate severe crises with widespread bank failures. Another view is that runs are mainly a symptom of deeper rot in the financial system, exacerbating crises rather than being their primary cause. Understanding this debate has first order implications for how to think about financial crises and the appropriate policy responses. In this post, we use a new database of more than 3,000 bank runs (introduced in our companion post) to show that poor fundamentals are central to explaining both when runs occur and when they have severe economic effects. We argue that this evidence tempers the view that small shocks can have outsized real effects through self-fulfilling run dynamics.

Keywords: banking; bank runs; bank failures; banking crises; financial crises; deposit insurance (search for similar items in EconPapers)
JEL-codes: G01 (search for similar items in EconPapers)
Date: 2026-07-07
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DOI: 10.59576/lse.20260707b

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