It may be that by offering such a good deal, the banks are worried about a different
kind of bank run?
Two, you become like a wildcat bank from the 1800s and issue banknotes that aren't backed, but then you run the
risk of a bank run and your value going to zero.
In a note to clients, UBS economists Thomas Wacker and Jürg de Spindler foretell «a chain
reaction of bank runs and soaring risk premiums... that ultimately breaks up the entire eurozone.»
Not that there will ever be a run on German banks, but the
effects of a bank run right across Southern Europe are going to be felt by the economy.
Fears of a bank run in Ukraine are rising, as central bank reserves sink and some 7 percent of bank deposits were lost in just 3 days.
Some of these papers focused on companies as customers of the banking system (Bernanke and Gertler 1989); others applied similar ideas to the banks themselves, allowing for the
possibility of bank runs (Diamond and Dybvig 1983).
The risk is that the threat of private - sector debt restructurings will lead to contagion in the
form of bank runs and the loss of market access for weak sovereigns and banks.
As for cash shortfalls in the
event of a bank run, that has no actuarial consideration because it is a systemic risk which is handled by the private Federal Reserve Banks being ordered by the FOMC (a public US agency) to issue circulating Federal Reserve Notes to meet withdrawal claims, and by policies of panic prevention which include FOMC lowering interest rates, FRBG implementation of BASEL capital requirements, and many asset side banking regulations.
There was the equivalent
of a bank run on the money market funds, which frequently invest in commercial paper issued by corporations to fund their operations and payrolls.
Mass withdrawal fears conjure
images of the bank runs that can beset countries in times of significant economic upheaval, so it is not surprising that investors around the world are feeling uneasy about the prospects of the U.K. real estate market.
Now while countries can not quickly unwind their US bonds without causing the
equivalent of a bank run that would devalue their holdings *; the momentum to do so is likely picking up steam.