What is the term for a large number of customers withdrawing cash from a bank?

What is the term for a large number of customers withdrawing cash from a bank?

• A. Bank panic
• B. Bank run
• C. Cash squeeze
• D. Deposit outflow

Answer: (B)

A bank run occurs when a large number of customers withdraw cash from a bank, typically driven by fear that the bank will become insolvent. This rush to take out deposits strains the bank’s reserves, because banks operate with fractional reserves and don’t keep all deposits on hand. If demand to withdraw exceeds available cash, the bank may be unable to meet withdrawals, potentially leading to failure and wider financial panic. The other terms are broader or less precise: a bank panic describes a systemic fear across the banking system, a cash squeeze refers to a general shortage of liquidity, and a deposit outflow describes withdrawals in general but not the specific mass-withdrawal event from a single bank.

A bank run occurs when a large number of customers withdraw cash from a bank, typically driven by fear that the bank will become insolvent. This rush to take out deposits strains the bank’s reserves, because banks operate with fractional reserves and don’t keep all deposits on hand. If demand to withdraw exceeds available cash, the bank may be unable to meet withdrawals, potentially leading to failure and wider financial panic. The other terms are broader or less precise: a bank panic describes a systemic fear across the banking system, a cash squeeze refers to a general shortage of liquidity, and a deposit outflow describes withdrawals in general but not the specific mass-withdrawal event from a single bank.