Simply put, they happen when folks who bank there fear that bank will lose their money.
The current bank run issue was driven by the type of customer at this bank (start-ups) and the banks investments with that money(long term fixed income securities).
Extended periods of ultra-low interest rates are a breeding ground for startups but that time passed about a year ago. Startups will generally still bleed cash and rather than it flowing to them from outside sources such as VC investors, they withdraw from the bank. That bank then has to sell its investments (banks don’t just put our money in a safe for us to use, they loan and invest) at a loss to cover withdrawals and now their balance sheets become more and more problematic.
Human nature being what it is, people panic and head to the bank to pull out all their money, banks don’t actually very much of it at all, the government steps in and shuts the whole thing down and…here we are.
This not the first time or the last time this will happen and it’s never a good thing. Plenty is written about our economy as a whole and the issues surrounding it.
On an individual basis, one man has no control over this happening but this can serve as a reminder that in all things not directly under our control, trusting God to guide us in our individual decisions regarding the finances he has entrusted to us is what we can do.
Proverbs speaks often on money, spending, investing…let’s read up.