Bank panic is the a series of unexpected cash withdrawals caused by a sudden decline in customers confidence or fear that the bank will close. Many depositors withdraw cash almost at the same time. Since the cash reserve a bank keeps on hand is only a small fraction of its deposits, a large number of withdrawals in a short period of time can deplete available cash and force the bank to close and possibly go out of business.
Two of the largest French banks, BNP Paribas and Crédit Agricole, where experince just that, bank panic. After reading the article, I understood that it was just a ploy by investers to sway the investment market. Rumers began to circulate that the banks were going under, because of that depositors begain pulling their money out of the banks. Once the banks took notice they begain to counter some of the rumers and began the see the business.
Turns out there was some cause to be concerned, with their personal investing in short-term loans they are at risk of freezes in credit markets, they also have a low liquidity ratio, which the banks are trying to change by adding depositors to move their money out of money market and into deposit accounts.
----Do you think the United States will have bank panic?