[{"data":1,"prerenderedAt":-1},["ShallowReactive",2],{"detail-sidebar-cat-0-en-105":3,"doc-seo-324745-105":59,"doc-detail-324745-en":130},{"code":4,"msg":5,"data":6},0,"success",[7,13,18,23,28,33,38,43,48,51,55],{"id":8,"doc_module":4,"doc_module_name":9,"category_name":10,"show_sort_weight":11,"slug":12},1,"Document","Story & Novel",90,"story-novel",{"id":14,"doc_module":4,"doc_module_name":9,"category_name":15,"show_sort_weight":16,"slug":17},2,"Literature",80,"literature",{"id":19,"doc_module":4,"doc_module_name":9,"category_name":20,"show_sort_weight":21,"slug":22},4,"Exam",70,"exam",{"id":24,"doc_module":4,"doc_module_name":9,"category_name":25,"show_sort_weight":26,"slug":27},5,"Comic",60,"comic",{"id":29,"doc_module":4,"doc_module_name":9,"category_name":30,"show_sort_weight":31,"slug":32},6,"Technology",50,"technology",{"id":34,"doc_module":4,"doc_module_name":9,"category_name":35,"show_sort_weight":36,"slug":37},7,"Healthcare",40,"healthcare",{"id":39,"doc_module":4,"doc_module_name":9,"category_name":40,"show_sort_weight":41,"slug":42},8,"Research & Report",30,"research-report",{"id":44,"doc_module":4,"doc_module_name":9,"category_name":45,"show_sort_weight":46,"slug":47},9,"Religion & Spirituality",20,"religion-spirituality",{"id":46,"doc_module":4,"doc_module_name":9,"category_name":49,"show_sort_weight":46,"slug":50},"World Cup","world-cup",{"id":52,"doc_module":4,"doc_module_name":9,"category_name":53,"show_sort_weight":52,"slug":54},10,"Lifestyle","lifestyle",{"id":56,"doc_module":4,"doc_module_name":9,"category_name":57,"show_sort_weight":24,"slug":58},19,"General","general",{"code":4,"msg":60,"data":61},"ok",{"site_id":62,"language":63,"slug":64,"title":65,"keywords":66,"description":67,"schema_data":68,"social_meta":123,"head_meta":125,"extra_data":127,"updated_unix":129},105,"en","bank-runs-deposit-insurance-and-bank-regulation-part-i","Bank Runs, Deposit Insurance, and Bank Regulation - Part I","","The article analyzes why bank runs occur and how deposit insurance and bank regulation influence depositor behavior. It argues that fears of insolvency can trigger self-fulfilling bank failures, while federal deposit insurance weakens market discipline because insured depositors lack incentives to withdraw only rumored or even real insolvency. It also details how insurance affects funding, monitoring, capital requirements, and the incentives of shareholders, managers, and regulators.",{"@graph":69,"@context":122},[70,84,105],{"@type":71,"itemListElement":72},"BreadcrumbList",[73,77,79,82],{"item":74,"name":75,"@type":76,"position":8},"https://docshare.wps.com","Home","ListItem",{"item":78,"name":9,"@type":76,"position":14},"https://docshare.wps.com/document/",{"item":80,"name":40,"@type":76,"position":81},"https://docshare.wps.com/document/research-report/",3,{"item":83,"name":65,"@type":76,"position":19},"https://docshare.wps.com/document/bank-runs-deposit-insurance-and-bank-regulation-part-i/324745/",{"url":83,"name":65,"@type":85,"image":86,"author":91,"headline":65,"publisher":94,"fileFormat":97,"inLanguage":63,"description":67,"dateModified":98,"datePublished":99,"encodingFormat":97,"isAccessibleForFree":100,"interactionStatistic":101},"DigitalDocument",{"url":87,"@type":88,"width":89,"height":90},"https://docshare.wps.com/thumbnails/bank-runs-deposit-insurance-and-bank-regulation-part-i/324745.png","ImageObject",300,407,{"name":92,"@type":93},"Miles","Person",{"url":74,"name":95,"@type":96},"DocShare","Organization","application/pdf","2026-11-01","2026-09-21",true,{"@type":102,"interactionType":103,"userInteractionCount":52},"InteractionCounter",{"@type":104},"ViewAction",{"@type":106,"mainEntity":107},"FAQPage",[108,114,118],{"name":109,"@type":110,"acceptedAnswer":111},"What triggers a bank run according to Part I?","Question",{"text":112,"@type":113},"A bank run occurs when depositors perceive the bank as insolvent or expect insolvency. The fear of potential trouble can become self-fulfilling and lead to failure.","Answer",{"name":115,"@type":110,"acceptedAnswer":116},"How does FDIC deposit insurance change depositor incentives?",{"text":117,"@type":113},"Insured depositors are guaranteed losses up to a stated maximum, so they have little incentive to withdraw funds when a bank is merely rumored to be insolvent. The insurance also reduces incentives to withdraw even if the bank is actually insolvent.",{"name":119,"@type":110,"acceptedAnswer":120},"What regulatory purpose does FDIC deposit insurance serve?",{"text":121,"@type":113},"The FDIC’s implicit mandate is to maintain confidence and provide stability in commercial banking. A key method is insuring depositors’ funds to reduce panic and maintain system confidence.","https://schema.org",{"og:url":83,"og:type":124,"og:title":65,"og:site_name":95,"og:description":67},"article",{"robots":126,"canonical":83},"index,follow",{"doc_id":128,"site_id":62},324745,1790097166,{"code":4,"msg":5,"data":131},{"doc_id":128,"user_id":132,"nickname":92,"user_avatar":133,"doc_module":4,"category_id":39,"category_name":40,"doc_title":65,"doc_description":67,"doc_content":134,"file_id":135,"file_url":136,"file_type":137,"file_size":138,"view_count":52,"is_deleted":4,"is_public":8,"is_downloadable":8,"audit_status":8,"page_count":24,"language":139,"language_code":63,"site_id":62,"html_lang":63,"table_of_contents":140,"faqs":141,"seo_title":142,"seo_description":67,"update_tm":143,"read_time":144,"preview_page_count":4},13056703019404,"https://ap-avatar.wpscdn.com/davatar_29158cc5080c5b710cf443261637dec0","by Charles T.Carlstrom  \nAs long s there have been banks,there have been bank runs.Unlikethe failure of mom-and-pop grocerystores(or Lockheed,for that matter),bank failures are frequently viewed ascontagious—able to cause other bankruns and lead to failures of otherwisesolvent banks.  \nA rumor or a hunch that a bank is introuble can lead to its demise.Thus,the fear that a bank \"might\"be introuble can be a self-fulfillingprophecy.  \nHaunted by the contagion of bankfailures that occurred during theGreat Depression,regulators are stillwary of letting banks fail.Large banksin particular are a cause of concerm,because the potential spillover effectsare thought to be excessive.  \nAlong with other bank regulators,theFederal Deposit Insurance Corpora-tion(FDIC)has an implicit mandateto maintain confidence in,and provide stability to,the commercialbanking system.A principal methodof achieving this mandate is by insur-ing depositors for losses up to a cur-rent maximum of $100,000.1  \nThe justification for FDIC insurance issimply that insured depositors will no  \nBank Runs,Deposit Insurance,and Bank Regulation,Part I  \nlonger have an incentive to pull theirmoney out of a bank that is merelyrumored to be insolvent.Unfortu-nately,federal deposit insurance pro-vides little incentive for insured depositors to withdraw their funds froma bank that actually is insolvent.  \nFor nearly 50 years after its inceptionin 1934,the FDIC was consideredsuccessful in fulfilling its mandateThe banking system grew rapidly withfew bank failures,and none wide-spread enough to threaten the entiresystem.Since 1981,however,the num-ber of bank failures has increasedsharply.In 1987 there were 184 bankclosings,and an additional 19 requiredFDIC assistance to stay afloat.2 Bankfailures are currently at their highestlevel since the Great Depression.  \nThis Economic Commentary,pre-sented in two parts,discusseswhether federally provided depositinsurance is necessary to preventwidespread bank runs by exploringsome of the myths and folklore asso-ciated with bank runs.Adam Smithargued that the invisible hand of selfinterest leads men to effectually promote the interests of society.Weattempt to analyze whether this invis-ible hand extends into the bankingindustry by examining both thecauses and cures of bank runs.  \nFebruary 1,1988  \nWidespread bank failures are oftenthought to be a possible consequenceof a banking system without federaldeposit insurance.This article con-siders whether federal deposit insur-ance is necessary to prevent bankruns.Part I describes some of thecosts of providing deposit insuranceand then introduces its justificationand benefits.PartII,presented in theupcoming February 15 EconomicCommentary,concludes with anexamination of contagious bank runsand a discussion of how the markethandled banking panics prior to theFederal Reserve System and the Fed-eral Deposit Insurance Corporation.  \n■ The Nature of Ban RunsA bank run can occur when some of abank's depositors perceive the bankto be insolvent or expect insolvencyto occur.  \nIf banks are like other businesses,then a bank run would be quiteacceptable as a source of market dis-cipline.For example,if the public  \nthought that a bank's manager hadembezzled a substantial portion ofthe bank's capital,depositors wouldhave an incentive to withdraw theirmoney.If a substantial portion of abank's deposits were withdrawn,thebank would then be forced to close.  \nThe threat of being run on and closeddown provides the incentive forstockholders to spend the necessaryresourcesto monitor their employees.The potential for bank runs alsocreates the incentive necessary tostop banks from undertaking exces-sively risky investmentsthose inwhich there is a high probability offailure as well as success.3  \n# ■ The Costs of Providing\n\nDeposit Insurance  \nDeposit insurance circumvents themarket discipline of insured deposi-tors.Because their funds are guaran-teed,insured depositors(those withdeposits less than or equal to$100,000","cbCaibu5QxWcxMlB","https://ap.wps.com/l/cbCaibu5QxWcxMlB","pdf",1184250,"English","# The Nature of Bank Runs\n## How fear of insolvency becomes self-fulfilling\n## Incentives for monitoring and risk control\n# The Costs of Providing Deposit Insurance\n## Undermining depositor market discipline\n## Effects on uninsured depositors and “too big to fail” perception\n## No-risk funding and reduced management monitoring\n## Capital-to-asset ratios and withdrawal risk","[{\"question\":\"What triggers a bank run according to Part I?\",\"answer\":\"A bank run occurs when depositors perceive the bank as insolvent or expect insolvency. The fear of potential trouble can become self-fulfilling and lead to failure.\"},{\"question\":\"How does FDIC deposit insurance change depositor incentives?\",\"answer\":\"Insured depositors are guaranteed losses up to a stated maximum, so they have little incentive to withdraw funds when a bank is merely rumored to be insolvent. The insurance also reduces incentives to withdraw even if the bank is actually insolvent.\"},{\"question\":\"What regulatory purpose does FDIC deposit insurance serve?\",\"answer\":\"The FDIC’s implicit mandate is to maintain confidence and provide stability in commercial banking. A key method is insuring depositors’ funds to reduce panic and maintain system confidence.\"}]","Bank Runs, Deposit Insurance, and Bank Regulation - Part I | PDF",1789968759,13]