Understanding Bank Runs: The Importance of Depositor-Bank Relationships and Networks

We use unique depositor level data for a bank that faced a run to understand factors such as the effectiveness of deposit insurance in preventing bank runs. We find uninsured depositors are most likely to run. Deposit insurance helps, but is only partially effective. Other factors that affect bank runs are the length and depth of the bank-depositor relationship, and social networks. We also find long term effects of a solvent bank run in that depositors who run do not return back to the bank. Our results help understand the underlying dynamics of bank runs and hold important policy implications.