The risk of further bank runs

The uneasy calm á la the 1930's

From Tuomas Malinen’s Forecasting Newsletter.

Issues contributed:

• The 2022-2023 bank runs in the U.S. have been historical in their ferocity.

• Their characteristics mirror runs last seen during the Great Depression.

• Approaching recession is likely to act as a ‘trigger’ to wider and more devastating bank runs.

The banking crisis has calmed down, again, as we anticipated in the March Special Issue. However, this is an uneasy calm with the psychological element (fear) slowly creeping into the minds of many depositors on the safety of their money. And they should be worried. Based on my 10+ years of research experience on financial crises, I am confident that this crisis is very far from over.

What is so worrying about the current bank runs, is their ferocity. Their magnitude was historical, even record-breaking, which raises questions about banking safety in the U.S., and also in Europe. And, they occurred outside a recession.

In this entry, I will summarize the most recent findings on the causes of the bank runs and take a look how they are likely to proceeed. I also make few notions on banking safety in the U.S., which we will use in mapping the most-safe and the most-risky banks in the U.S. We will provide the first list of most-safe banks in the U.S. in the coming weeks in the GnS Economics Newsletter.

Comparison with historical runs